Delores A. Conway, director of USC's Casden Real Estate Economics Forecast, last fall predicted a 15% decline in home values. But now, "20% to 25% looks more likely," she says, "and that's not to say we won't see 30%." USC's Conway said one reason for the sharper-than-expected declines is that loan defaults caused more trouble than many had anticipated, causing investors to lose their appetite for pools of these loans bundled into securities. Now, "there is a shortage of investors to back mortgages. The market has seized," she said. That means mortgages for would-be home buyers are harder to obtain and usually come at higher interest rates, she said. Before home values plummeted, of course, many people benefited from a dramatic run-up in prices.
March 14, 2008