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Either way, the prognosis is not good, as economic conditions are deteriorating rapidly. With that thought in mind, please consider Housing Slide in U.S. May Drag Economy Into Recession
“If foreclosures continue to mount and depress home prices, that could send the economy back into a recession,” said Celia Chen, an economist who tracks the industry for Moody’s Analytics Inc. “The housing market and the broader economy are closely intertwined.”
With 14.6 million Americans out of work,
homeowners are struggling to hold onto their properties.
One in seven mortgages were delinquent or in foreclosure during the first quarter,
the highest in records dating to 1979, according to the Washington- based Mortgage Bankers Association. Foreclosures probably will top 1 million this year, said RealtyTrac Inc., an Irvine, California-based data company.
Federal efforts to help have had little success. Of 1.31 million loan modifications started under the Obama administration’s Home Affordable Modification Program, 48 percent were canceled by the end of July, the Treasury Department said Aug. 20. More than half of all modifications defaulted again within 12 months, the Office of the Comptroller of the Currency said June 23.
Shadow inventory, or the number of homes repossessed or in default that eventually will be offered for sale, stood at 7.3 million in the first quarter,
according to Laurie Goodman, an analyst in New York at mortgage-bond broker Amherst Securities Group LP. As those properties hit the market, prices will come under pressure and buyers will wait for better deals.
“The only thing that’s going to fix the housing markets right now is a work-through of what excess supply is on the markets and improvement in unemployment,” Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said today in an interview on Bloomberg Television’s “In the Loop with Betty Liu.” “That process is a very, very long-term process.”
Consumer spending rose 1.6 percent in the second quarter, down from 1.9 percent in the previous three months. Purchases of home furnishings and appliances fell 1.7 percent to an annual pace of $256.5 billion in June from a 2010 high in April, according to the Bureau of Economic Analysis.
“There is an epidemic of thrift,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts.
“Households and businesses are super-cautious right now. Sometime in the next 6 to 12 months, we’ll start to see more movement on home and car purchases and greater willingness on the part of businesses to hire.”
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