Rational RePricing or Credit Crunch

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Rational Re-Pricing or Credit Crunch

• Presented by
• Mark M. Zandi,Chief Economist

August 7, 2007
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The Housing Downturn is in Full Swing...
Single-Family House Price, chg yr ago,
'06q1-'07q1
Decline
Flat
U.S. -1.4
Rising
Sources Fiserv CSW OFHEO, Moody's Economy.com
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...Driven by Swollen Inventories...
of excess housing units, ths
Sources Census, Moody's Economy.com
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...and There is More to Come
What It Would Take To Reach a Bottom By Year-End
2008
Job Growth
Baseline Outlook
Source Moody's Economy.com
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Stunning Erosion in Mortgage Quality...
Delinquency rate, of residential mortgage debt,

Sources Equifax, Moody's Economy.com
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...With More Credit Problems Coming...
Mortgage debt outstanding facing first payment
reset, bil
Source CreditSuisse
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...Generating Substantial Financial Damage
mil, Source Moodys Economy.com
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Subprime Mortgage Market Unravels...
Price of ABX BBB- Index
Subprime loans originated in
Source Markit
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...Rest of the Credit Market Reprices...
Interest rate spread over 10-yr Treasury, basis
points
Average
Sources Lehman, FRB
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...But the Risks are Rising
Residential RE Assets of Large Commercial Banks
Source Federal Reserve
Share of assets (R)
bil (L)
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