When you have luminaries like Freddie Mac CEO Richard Syron telling investors that peak-to-trough, housing should decline 15 percent, it's hard to estimate what kind of psychological and economic damage it will do to housing and the overall economy.

We're only half way to the trough, according to the pessimistic Case-Shiller Index, where home prices were calculated to have dropped 8 percent in 2007 from 2006. By the National Association of Realtors calculations, home prices dropped 1.4 percent in 2007, so we're hardly out of the starting gate.

Oil prices have struck new records over $107, grocery staples like milk and bread have doubled over the last year, and the stock market has taken a 2,000 point tumble. NAR economists believe gross domestic product and real disposable income will recede to half the 2006 (1.5 percent, and 3.2 percent respectively) rate. Inflation will be elevated at 3.2 percent.

Uncertainty about the markets has migrated to commercial real estate, which is essentially flat, says the NAR. After witnessing single-family and multifamily housing stagnate, developers are beginning to wonder if existing office spaces will rent.

There's a lot to be anxious about, but what if the worst doesn't come true?

The NAR predicts home prices will drop another 1.2 percent in 2008, but anticipates a turnaround in 2009 that will overturn both years of losses in 2007 and 2008. That's a far cry from a 20 percent depression in housing.

So why is there such a difference in outlook? Why is Syron so down on housing prices?

The answer might be found in his written testimony to Congress on GSE reform in February. This took place one day after temporary loan limits were imposed by OFHEO, which oversees Freddie Mac and Fannie Mae.

Syron points out that it's part of the GSE's mission to buy mortgages and hold them to "maintain the liquidity, stability, and affordability of the conventional conforming market."

He goes on to note that extending credit to weaker borrowers while expecting housing price increases to balance risk was unrealistic.

He then expresses concern about the "efficacy of legislation that imposes more and deeper-targeted housing goals on the GSEs, as well as additional duties and penalties."

Looks to me like he didn't want to raise Freddie Mac loan limits. The reason? Investors. Syron is in the impossible position of all CEOs -- balancing customer service (the U.S.government and its citizens) and profits for investors.

While Freddie Mac may be playing ball with OFHEO and Congress, Syron may have found other ways to slow down Freddie Mac's exposure to higher loan limits on conforming loans.

The GSE has announced suddenly tighter standards for mortgage lenders and how they use appraisers to reduce conflicts of interest. The benefit to consumers is less risk, but it also lowers risk for Freddie Mac.

So does a dire prediction about housing prices. If he can slow down the number of high-exposure conforming loans that Freddie Mac has to secure, then he has a better shot of reversing $3 billion in losses in 2007.

In a meeting with analysts yesterday, Syron made it clear what his fiduciary duty is -- to shareholders.

Published: March 13, 2008

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.