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US housing slump could last up till early 2009

NEW YORK – HOUSING markets from Punta Gorda in Florida to Stockton in California will crash and suffer price drops of more than 30 per cent before the housing crisis is over, a report from Moody’s Economy.com said yesterday.

The United States housing recession will continue up till early 2009, said the report, co-authored by Mr Mark Zandi, chief economist, and Ms Celia Chen, director of housing economics.

The report paints a worsening picture of the housing sector, which is in the midst of its worst downturn since World War II.

While activity will stabilise in 2009, it will not be until 2010 before a measurable improvement in sales, construction and pricing will emerge, the report said.

House prices are forecast to fall 13 per cent from their peak up till early 2009. After accounting for incentives home sellers are offering buyers, effective declines peak-to-trough will total well over 15 per cent, the report said.

Punta Gorda, Florida, and Stockton, California, are the hardest hit markets in the US, with price declines from peak-to-trough forecast at 35.3 per cent and 31.6 per cent, respectively. ‘This is the most severe housing recession since the post-World War II period,’ Mr Zandi told Reuters.

Home sales, however, should hit a bottom early next year, which would mark a 40 per cent drop from peak-totrough.

‘The housing market’s most fundamental problem is it is awash in unsold inventory,’ the report said.

In addition, the housing downturn will take a large toll on the rest of the economy.

During the height of the boom in 2004 and 2005, housing contributed nearly a percentage point to annual real gross domestic product growth.

 

Source: REUTERS (The Straits Times 7 Dec 07)

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