Does PIMCO believe a 4% Fed Funds rate will be enough to significantly slow the housing market?
McCulley: For the housing market, our base case scenario is that year-over-year changes in median home prices are going to slow from double-digit increases in the neighbourhood of 12% down to mid-single digit increases, which would be a soft landing for housing at the national level. At the same time, we believe there are a number of geographical areas in the real estate market that won’t have a soft landing and could actually see price declines rather than just slower price appreciation. It’s not a national bubble but there are more than a few pockets of bubbles around the country and they’re unlikely to have soft landings. Spotting the turning point in housing is a critical issue in our outlook. Bill Gross appointed mortgage guru Scott Simon to lead an Investigative Team, as we call it, that is reporting back in virtually real-time to the Investment Committee on the state of the property market. So far, the Team has done on-the-ground work in 10 cities, including riding along with re
