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Pimco’s Simon: There Was Never a Housing Recovery

WSJ - June 30, 2011

Scott Simon, a managing director and head of global asset-giant Pimco’s mortgage- and asset-backed securities teams, is credited with foreseeing the housing crash and helping his firm dodge losses that plagued Wall Street.

Q: Could you begin by framing the current state of the housing market? Do you see a double dip market?

A: We are seeing signs of what we have long suspected: There never was a housing recovery. In fact, I argue the market is in a fragile state that is far easier to break than to fix. If policy makers alter the government’s current approach to housing and unwittingly break the market, they may not be able to repair the damage within the foreseeable future. … We anticipate an average decline from here of about 6% to 8% in prices across the country.

Q: Are more foreclosures expected to hit the market?

A: We see potential for a substantial number of foreclosures over the next three years – as many as 6 million to 7 million additional foreclosures, on top of the roughly 2 million we estimate have already occurred. Foreclosures may peak in about two years, but the numbers could still be high for a few years after that and then likely taper off.

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