Mark Zandi On the California's Housing Market

Mark Zandi, chief economist of Economy.com laid out two possible scenarios for California's housing market. From DailyBreeze.com, November 1st:

California's housing market is overvalued by 10 percent to 20 percent, said Mark Zandi, chief economist and co-founder of Economy.com, at a conference Monday

Housing prices could take a sharp drop if interest rates rise quickly enough. Another possibility is that home prices would flatten "for an extended period of time," Zandi said.

A flattening out of prices, connected with a gradual rise in interest rates, is the most likely scenario, Zandi said.

"I do think we will see the market correct," Zandi said.

"California's economy -- its success and failure -- is intimately tied to the housing market," Zandi said.

Zandi sees a soft landing as more probable then a hard landing. A hard landing for California's housing market is pretty much inevitable because it has been a speculative episode. However, Mark Zandi is correct in noting the importance of the housing market for California's economy.