April 13, 2007
Leading real estate investor: Prices may fall 20%, and "It will be the biggest housing-price decline since the Great Depression"
Man, now EVERYONE is starting to sound like HP, eh? Even the big boys... I think we'll be hearing the "since the Great Depression" comparisons for a long time to come...
Heebner Says Home Prices May Fall 20% Amid Bad Loans
April 12 (Bloomberg) -- Kenneth Heebner, manager of the top-performing real-estate fund over the past decade, said U.S. home prices may plunge as much as 20 percent because of rising defaults on riskier mortgages.
Subprime loans, made to borrowers with a history of missed payments or untested credit, and ``Alt-A'' loans, which require little or no documentation, account for about $2.5 trillion of the $10 trillion in outstanding mortgages, according to Moody's Economy.com. As much as 40 percent of these loans may default, flooding the real estate market, Heebner said.
``It will be the biggest housing-price decline since the Great Depression,'' Heebner, 66, said today in an interview in Boston. Prices may fall by a fifth in some markets, he said.
That would leave home prices at levels last seen in 2003 and 2004, the middle of boom that lifted prices to a record in 2005. The damage from high-risk mortgages will slow the U.S. economy, though not enough to send it into a recession, Heebner said. Fourth-quarter growth was revised to 2.5 percent from 3.5 percent because of housing, the government said March 29.
Heebner, who co-founded Capital Growth Management in 1990, manages the $1.6 billion CGM Realty Fund. The fund has gained an average of 20 percent a year in the past 10 years, the most of any real estate fund over that period, Bloomberg data show.