This was a part of their updating their ResiLogic mortgage loss model, which is used to rate residential mortgage backed securities (RMBS), and they now believe that in constant dollar terms, residential real estate will fall 25% over the next 5 years.

Peak to trough, local housing bubbles bursting are typically 5 years, but this is far more widespread, and the bubble is far frothier.

I think that they are too optimistic. They ignore the size of the bubble, the national nature of the bubble, and the fact that unsustainably low interests created the bubble.

I agree with Rich Toscano’s assessment he did two years ago, which was far grimmer, (a 3-parter, see here, here, and here), though it should be noted that it’s primarily about San Diego, one of the frothier markets before the bubble burst.