Home Prices in U.S. May Drop 8%, Pimco’s Simon Says: Tom Keene

U.S. home prices will probably decline an additional 6 percent to 8 percent before bottoming, Pacific Investment Management Co.’s Scott Simon said.

Potential home buyers are being kept on the sidelines by policy makers tightening rules for government-backed loans and banks being more restrictive than required by Fannie Mae, Freddie Mac and the Federal Housing Administration, Simon said in a radio interview on “Bloomberg Surveillance” with Tom Keene from Pimco’s headquarters in Newport Beach, California.

“If you can borrow, housing is so cheap, but if you can’t borrow it’s infinitely expensive,” said Simon, the mortgage head at the firm, which runs the world’s largest bond fund.

The worst housing slump since the Great Depression has so far driven property values down by about 31 percent since a mid- 2006 peak, according to an S&P/Case-Shiller index.

Drops of 15 percent to 20 percent more would become a “dire situation” because that would leave nearly half of U.S. homeowners with mortgages owing more than their properties’ values, up from about a third now, he said.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net Thomas R. Keene in New York at tkeene@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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Nov. 14 (Bloomberg) -- Jennifer Bridwell, head of alternatives product development at Pacific Investment Management Co., talks about the U.S. housing market outlook and investing in distressed securities. She speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

Audio Download: Pimco’s Simon Says U.S. Home Prices Will Fall Again