Hope<\/a>, October 2005:<\/p>\n The keen interest of the media, and by extension, the public, in the future of house price growth in the United States centers on the question of whether there is a house price bubble nationally or regionally. Even among those who concede that a bubble per se may not be present, many worry that they may experience a decline in home prices in their metro area due to the very high and unsustainable rise in values over recent years in many parts of the United States. We examine this potential by forecasting the likely change in prices under three models \u2013 one that asserts a mean reversion correction on regional markets to return the national average gain in prices to the 50-year annual growth rate of 5 percent over the period 1998-2010; the second and third base future regional and national home price growth on economic fundamentals.<\/p>\n We also discuss recent findings by Chang, Cutts and Green (2005) and perform a simple extension of their work applied to 22 major cities. In all cases, we find the predicted worst-case outcomes to be much less dire than the \u201cdoomsday\u201d predictions reported in the mainstream press and elsewhere.<\/strong><\/em><\/p><\/blockquote>\n Written by the then-Chief Economist, Frank Nothaft, and Deputy Chief Economist, Amy Crews Cutts, at Freddie Mac.<\/p>\n Last week, the current heads of Freddie Mac and Fannie Mae received news of 7-figure bonuses<\/a> at the same time the government threw their corporations an unlimited lifeline<\/a>.\u00a0 In fact, the government won’t even estimate<\/em><\/a> how much money it’ll take to stabilize these companies.\u00a0 Talk about too big to fail.<\/p>\n If the company was making decisions based on those employees who were responsible for “primary and secondary mortgage market analysis and research, macroeconomic analysis and forecasting,” and who had, “published studies in academic journals and books on such topics as the economics of subprime lending,” then it’s easy to see where they went wrong.<\/p>\n