Housing Outlook Grim, As Downturn Called "Worst in a Generation"
The nation is in the throes of a housing downturn that researchers at Harvard University's Joint Center for Housing Studies said Monday morning was "shaping up to be the worst in a generation." While the falloff in housing starts, new home sales, and existing home sales already rivals the worst downturns in the post World War II era, the study found that home price declines and mortgage defaults are the worst on records that date back to the 1960s and 1970s. "The slump in housing markets has not yet run its full course," said Nicolas Retsinas, the director of the Joint Center for Housing Studies, echoing what has alreadly become prevailing sentiment among most economists. "Mortgage rates have barely responded to the aggressive easing of the Federal Reserve, the supply of for-sale vacant units continues to grow, and much tighter underwriting is locking many would-be homebuyers out of the market. "With home prices falling in most metropolitan areas, homeowners are tightening their belts, remodeling less, and staying on the sidelines." Buyers are also entering foreclosure at a record rate, thanks to lax lending standards that saw the number of borrowers paying more than half their income on housing skyrocket from 6.5 million in 2001 to 8.8 million in 2006, according to the study's data. The number of homes entering foreclosure nearly doubled to 1.3 million in 2007 from about 660,000 in 2005 -- numbers that are likely to get much worse this year, based of activity thus far.