Tuesday, July 8, 2008

U.S. home slump harder to reverse than usual

The nation's two-year-old housing market downturn is as bad as any since World War II and record foreclosures and tighter credit will make it more difficult to reverse, according to a report issued Monday by Harvard University's Joint Center for Housing Studies. Any housing recovery is unlikely to occur until potential homebuyers believe prices have hit bottom, observers say.

For my Readers:

  • Homebuyers remain on the sidelines as they face the highest mortgage rates in nine months and stricter lending criteria. The Federal Reserve efforts to keep interest rates low with the hope of stimulating buyer activity has largely fallen on deaf ears as potential homebuyers watch prices continue to slide in many areas of the nation courtesy of a large inventory of foreclosed properties for sale.

  • Director Nicolas Retsinas observed that housing markets "historically recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability. It will take longer to rebound given the unusually high levels of foreclosures and constrained credit markets. The slump in housing markets has not yet run its full course."

  • The report concludes: "...if the economy slips into a recession or job losses keep racking up, household growth and homeownership demand could fall even more."

Source: Reuters (6/23/2008)

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