February 20, 2007
Prediction: More Pain for Homeowners
Prediction: More Pain for Homeowners
A glut of vacant homes suggests that the U.S. housing market has not yet stabilized and may be poised for another downturn. "Now that oil prices and mortgage rates have stopped falling, we will be back lamenting the downturn in the housing market and its spreading effects on the economy in the second quarter, much as we were in the summer and fall 2006," Merrill Lynch economist David Rosenberg wrote. "Looking at the inventory backlog and still-stretched affordability levels, this story is far from over."
The Federal Reserve's policy-setting Federal Open Market Committee cited "tentative signs of stabilization" in the housing market when it voted unanimously to keep interest rates on hold recently.
Pending home sales jumped a stronger-than-expected 4.9 percent in December, the biggest gain since March 2004, supporting ideas that the worst was over and the housing slowdown would not tank the broader economy.
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