Housing Slump Sparked by Mortgage Mess Thought to Last Longer
July 14, 2008 - A growing number of analysts and market watchers believe that the slowdown in real estate will continue for another year, extending it beyond the period that had been originally anticipated. Real estate prices are not expected to bottom out until the end of next year as the housing market is now stockpiled with inventory, including both homes in foreclosure as well as new builder constructed tract homes. A turnaround is not seen as likely until sometime around 2010 in those areas which were particularly hard hit. Recently released figures reflecting pending home sales, fell by over 4.5% reaching the third worst recorded reading. Sales of pending homes fell the most in the south and the west was the least effected. However pending sales figures were revised upwards for the prior month, yet still reflected a drop of 14% from levels a year ago. Home prices nationally were down over 6% and in 20 urban areas fell as much as 15% over numbers reflected a year earlier. The worst credit crunch in decades appears to have occurred during a period of lax regulation and oversight. The Fed has proposed wide sweeping changes which would restrict the imprudent lending practices which resulted in the sub-prime mortgage backed securities meltdown. These newly proposed rules would prohibit lenders from applying unsound lending practices such as such as overlooking a potential borrower’s ability to repay a loan in the underwriting process as well as evaluating the merits of a loan application based on the current market value of the subject property and not requiring that a borrower have an equity position in the home.
