Bloomberg reports the worst is yet to come for the U.S. housing market.
“We’re talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit” said PIMCO Executive Vice President Mark Kiesel.
“It’s not just a housing recession anymore, it looks more and more like an economic recession,” said Nouriel Roubini, from Roubini Global Economics in New York.
In the past 5 weeks, the 30 year mortgage rate has increased a half a percent to 6.74 percent. This, coupled with a tightening of subprime lending standards after the collapse of many subprime lenders earlier in the year is causing pain among home owners.
The recent increase in mortgage rates is the biggest spike since 2004. The change means buyers can afford 8 percent less house than they could five weeks ago” said Kiesel.
» Rate Rise Pushes Housing, Economy to `Blood Bath’ – Bloomberg, 20th June 2007.