Down, Down, Down

Let me preface this by saying that I'm firmly within the the camp of those that think the ratings agencies are as complicit in the current mortgage industry crisis as any of the other players (particularly when we start talking about the insane securitization practices which extended the reach of the inevitable explosion immensely).

But, with that caveat aside, let's see what Fitch Ratings is saying today about the outlook for the housing market (by way of Calculated Risk):

Fitch Ratings said Thursday that it had enhanced its U.S. residential mortgage loss mode ... Fitch’s revisions suggest ... a very bearish take on housing prices over the next five years: Fitch said in its report that it is expecting home prices to decline by an average of 25 percent in real terms at the national level over the next five years, starting from the second quarter of 2008.

And that’s the base case scenario....

...Fitch will also roll out new 25 MSA-level risk factors influencing frequency of foreclosure and loss severity estimates, the agency said; the 25 MSAs chosen are those that have exhibited strong non-conforming mortgage lending activity in the past.

“Some MSAs such as San Diego and San Francisco, CA are expected to experience home price declines by as much as 47 percent and 33 percent over the next five years, while home prices in MSAs such as San Antonio, TX are expected to appreciate by 7 percent,” [Huxley Somerville, group managing director and head of Fitch’s U.S. RMBS group said].

And, as also noted by the folks at Calculated Risk, understand that the above is referring to real prices, adjusted for inflation. So that's real prices, and note that Fitch is looking at a five year downward trend.

As I've been saying for quite some time now, it's going to get a whole lot worse before it starts to get better. Anyone who tells you otherwise is either lying, willfully deluding themselves, or just simply doesn't have a grasp of how deep the rot really goes.