UPDATE 2-US home slump harder to reverse than usual-Harvard
Reuters, June 23, 2008
Record foreclosures and
limited access to credit will make it harder than usual for the
U.S. housing market to rebound from this slump, the worst since
at least World War Two, according to a Harvard University study
released on Monday.
A two-year drop in home prices is eating into housing
wealth, curbing consumer spending and slicing away economic
growth. This is unlikely to change until potential home buyers
are convinced that prices have stopped tumbling, the study
found.
The downturn has room to run.
"I tend to be optimistic. I want to be optimistic. I find
at this point in time it's not warranted," Nicolas P. Retsinas,
director of the Joint Center for Housing Studies at Harvard,
said at a press briefing.
The highest home loan rates in nine months and strict
lending standards are keeping buyers on the sidelines, even
after aggressive Federal Reserve intervention and a 16 percent
national home price slide from the 2006 peak.
"Historically, housing markets recover only after the
economy has entered a recession and a combination of falling
mortgage interest rates and house prices have improved housing
affordability," Retsinas said in a statement released with the
study.
"It will take longer this time to rebound given the
unusually high levels of foreclosures and constrained credit
markets," he said. "The slump in housing markets has not yet
run its full course."
Price declines and mortgage defaults are the worst on
records dating back to the 1960s and 1970s, the study noted.
Job losses and falling prices intensify risk of foreclosure.
The number of homes entering foreclosure nearly doubled to
1.3 million in 2007 from about 660,000 in 2005.
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