House prices follow Geithner's "adverse" forecast
The Treasury Department's "stress test" laid out an "adverse" scenario for the economy and then calculated the the future effect on banks. As Calculated Risk points out, prices so far are tracking pretty closely with the adverse scenario. However, it's early in the process -- prices could still start ending their free fall. And, as CR's graph shows, home prices according to the Case-Shiller Index are doing slightly better than the adverse scenerio.
Comments
I think that your perspective is too optimistic. There were two stress-test scenarios used by the Treasury, the baseline and the more adverse scenario, respectively. The actual Case-Shiller data is well below the baseline and only slightly better than the more adverse trendline. In other words, if the actual data take a slight negative turn, we will discover that the stress test will have overstated the net asset position of the banks.
Posted by: Stuart Levine | May 26, 2009 11:13 PM