Is the US Housing Market dowturn a short-term thing or the beginning of a recession?
 

US home woes 'near-perfect storm'

Washington Mutual predicts US house prices will fall
The downturn in the US housing and mortgage sectors now represents "a near-perfect storm", one of the country's leading lenders has warned.

Washington Mutual chief executive Kerry Killinger said the result would likely be falling house prices across many parts of America into 2008.

Centred on the sub-prime sector, the crisis in the US mortgage market has been sparked by record loan defaults.

Washington Mutual may put aside an extra $500m (£247m) to cover bad loans.

This would come on top of the $1.5bn to $1.7bn of exposure the company - now America's sixth largest mortgage lender - had forecast in July.

"Most housing markets appear to be weakening, to us," said Mr Killinger.

Global issue

In recent weeks, US house price figures have been mixed.

Last month, the Commerce Department said new homes sales held up in July, while further figures from the National Association of Realtors showed sales of existing properties fell to a near five-year low in the same month.

The crisis in the US sub-prime mortgage sector has been sparked by American mortgage rates rising sharply over the past year.

As a result more than 50,000 jobs have been lost in the US mortgage industry so far this year, including 12,000 announced last week by the largest lender Countrywide.

The crisis has spread overseas, and to the wider global financial sector, because US sub-prime debt is often resold as part of a wider debt package.

As a consequence, banks and investors are, as yet, unsure about how far the sub-prime downturn could spread.

In turn, global banks have become far more cautious about whom they lend to, and are stockpiling funds to cover any potential liabilities of their own.

The result has been a sharp downturn in available credit, and higher lending rates, both for companies wishing to borrow, and individuals trying to get a mortgage.

Now do you think this is indicative of a short-term splum or long-term trend?g

oops last sentence obviously was to read: short-term slump or long-term trending

yeah the 20 year old gallery submitters from GFY are the best experts to answer this question :banana

:1orglaugh:1orglaugh

We were recently in the UK for my nieces wedding and talked about them getting a place to live. They were telling me the banks were prepared to land more than they can reasonably afford to payback.

They thought the banks approach was if they default the banks repossess the house, sells it to clear the debt, any uncleared debt is still owed. The growth in the housing market in the time they were repaying the mortgage and the amount they repaid put the banks on a no lose situation.

Great plan, unless the housing market collapses and the borrowers declare bankrupt on mass.