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Lending Real Estate

Barclays updates home price scenarios

Creates 'down 30%' option


Industry experts are initiating scenarios to incorporate possible changes to looming home price forecasts over the next five years.

Barclays added a 'down 30%' scenario in which home prices decline approximately 30% cumulatively over a five-year period, with most of the drop occurring within the first two years — similar to the housing downturn experienced from 2007 to 2011, explained Barclays analysts Steve Bergantino and Chun Li.

"Our base case projection for full-year 2013 U.S. home price appreciation is now 11%, up from 9.7% previously," the analysts pointed out.

Additionally, the base case projections for 2013 home price appreciation in Arizona, California, Florida and Nevada are now 9.9%, 17%, 10.4% and 23.3%, respectively — all states were revised up.

Going forward, Barclays has renamed various relationships between the base case and alternative scenarios in an attempt to make the names more clearly reflect the design of standard set of home price scenarios.

For example, instead of ‘strong recovery’ the new scenario name will be ‘base + 20%,’ meaning home prices are up 20% relative to base price over four years.

Meanwhile, projected base case losses are slightly lower, consistent with the small increase in base case home price appreciation. 


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