Further to my post a couple of days ago regarding declining home prices, Bloomberg yesterday published this interview with Kenneth Heebner, co-founder of the top-performing real-estate fund over the past decade, Capital Growth Management. Heebner predicts that home prices may drop 20% nationwide due to the overhang from the sub-prime fiasco.
According to him, foreclosures on sub prime loans may reach 40% of outstanding mortgages (!) and if this happens the foreclosed properties will flood the market and exert downwards pressure on home prices.
I am no real estate genius, but I am telling you, this is going to be a tough one. Heebner is not forecasting a recession but I have the feeling that a recession is in the cards. I certainly hope I am wrong, but I think the first domino has already fallen and the rest is a matter of time.
What do you think?