Mark Zandi of Economy.com Sticks His Neck Out

Mark Zandi, chief economist at Moody's Economy.com, is making some bold predictions for the US housing market and the effects of the Federal economic stimulus package.

On the housing market (Businessweek.com, 1/26/09)

"Moody’s Economy.com Chief Economist Mark Zandi is coming out with a new study on the housing market. He’ll discuss it in a conference call with clients on Feb. 5.
Moody’s offered a sneak peak. Among the conclusions:

· Home prices will stabilize by the second half of this year.
· The national Case-Shiller home price index will decline by another 12% from the third quarter of last year for a total peak-to-trough decline of 30%.
· By the end of this unprecedented downturn, house prices will have declined by double digits peak to trough in nearly 62% of the nation’s 381 metro areas. In about 10% of metro areas, price declines will exceed 30%."

For $250, you can hear it straight from the man himself on Feb. 5.


On the stimulus (The Economic Impact of the American Recovery and Reinvestment Act Mark Zandi - January 21, 2009, Economy.com)

"The fiscal stimulus plan proposed by the House Democrats includes a reasonably designed mix of government spending increases and tax cuts. The spending increases total about $550 billion in 2009-2010, and there are $275 billion in tax cuts. While the timing has yet to be determined, the tax cuts are expected to occur largely this year and much of the spending would begin in 2010... Increased government spending provides a large economic bang for the buck and thus significantly boosts the economy. The benefits begin as soon as the money is disbursed and are less likely than tax cuts to be diluted by an increase in imports. The most effective proposals included in the House stimulus plan are extending unemployment insurance benefits, expanding the food stamp program, and increasing aid to state and local governments. Increasing infrastructure spending will also greatly boost the economy, particularly as the current downturn is expected to last for an extended period. Most of the infrastructure money will be spent on hiring workers and on materials and equipment produced domestically. Tax cuts generally provide less of an economic boost, particularly if they are temporary; on the other hand they can be implemented quickly..."