Mark Zandi, Chief Economist at Moody’s Economy.com, is another one of the few whose early predictions about the housing market collapse and subsequent deep recession were accurate, at least in the big picture. He does not get the press of a Roubini or a Telib, but he should be considered to be part of that group.
Where he does not fit into that group now, however, is in his outlook over the next 2 years. Follow the link for more, but here are some highlights.
Zandi forecasts a 3% peak-to-trough decline in GDP – clearly in the camp of the optimists. He projects an additional decline in housing prices of 10% or slightly more, on top of the 25% decline since their peak in early 2006. After prices bottom mid-year, he predicted, they will level off in 2010 and rise appreciably in 2011.
But it will be another decade – sometime around 2020 – before housing prices return to their 2006 peak values.
I’m not sure how “optimistic” it is to believe that housing prices will not recover to 2006 levels until 2020. But he also believes that while unemployment will grow into 2010, peaking around 9%, we will see a strong recovery in 2011.
It is interesting how in a very short period of time a forecast of recovery that is 2 years out from now has been switched from being considered “pessimistic” to “optimistic”.