The market won't hit a bottom “until the end of '08 and then we have some period of time to work our way back up again,'' Mudd said today in an interview in Washington.
U.S. home prices will fall 2 percent to 4 percent this year, and “more next year,'' he said. Sales of new homes in the U.S. dropped more than forecast in August and prices plunged by the most in almost four decades, the Commerce Department said today in Washington.
The slump, and record foreclosure rates, will increase credit losses at Fannie Mae, while remaining in a normal range, Mudd said in the interview. The company had about 25,125 foreclosed properties on its books at the end of last year.
Credit losses have risen to as much as 6 basis points from a ``very, very low'' level of around 2 basis points, Mudd said. “We're back in a normal historical range.''
Falling housing prices, particularly in the Midwestern U.S. states, drove credit loses to 0.027 percentage points of the company's total book in 2006, Fannie Mae said last month. Credit-related expenses rose 83 percent to $783 million as the cost of foreclosed property increased to $194 million, compared with a gain of $13 million a year earlier.
Home purchases declined 8.3 percent to an annual pace of 795,000, the lowest level in more than seven years, from a revised 867,000 rate in July, the Commerce Department said. The median price dropped 7.5 percent from August 2006, the most since 1970.