by Calculated Risk on 11/18/2006 03:07:00 PM

From the OC Register Insider Q&A: Economist Chris Thornberg. Here are some excerpts:

Q. Do you have a firm projection of, say, 2007 price movements?

A. There is no such thing as firm projection. But all in all there are two scenarios. The first is that the rest of the economy keeps chugging ahead and the market is stabilized by job and income growth. Price growth remains at zero. This is the good scenario. The bad is that the rest of the economy also cools, and prices fall. But don't expect that prices will collapse by, say, 30%. Housing markets aren't that liquid. Declines will be moderate.
...
Q. What might change your outlook -- good or bad?

A. The key is consumer spending. If people respond to a cooling in housing prices by cutting back on home spending it could get ugly out there in the rest of the economy very quickly. This would turn a bad housing market into an abysmal one. I don't see much upside for the next few years regardless of what may happen.