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Housing Slump Likely to Continue

[Aug 13, 2007.]

 

Financial forecasters say the current housing slump is likely to continue in the near term.

Figures obtained from the U.S. Commerce Department show that sales of single-family houses dropped 6.6% in June. That's the 5th decrease in half a year.

In addition, some of the country's leading builders recorded larger losses than had been expected for the spring quarter. Ironically, the spring tends to be the best season for selling homes. Builders have been cutting prices in an effort to boost sales but, so far, the price-cutting scheme hasn't been working.

The housing slump may have a domino effect on car sales, stock sales, and other economic indicators. Realtors say that, in some areas of the country, the number of houses on the market have increased, but sales are still dismal. In June, according to the National Association of Realtors, home sales dropped 3.8%--the lowest rate in 5 years.

The housing market has also been hurt by the crisis in the subprime loan sector. Far too often, people have been lured into contracting for a subprime mortgage, even though they lacked the financial wherewithal to repay the loan. The default rates have been so discouraging, in fact, that some lenders are now refusing to offer the loans.

Current homeowners could also be squeezed by increasing monthly mortgage payments as a result of changes in adjustable rate loans. The financial pinch could conceivably lead to additional foreclosures on down the line.

It's been said that, as a result of the current economic climate, it's now a buyer's market. That means that prospective buyers could end up paying a great deal less for properties than they would otherwise. In fact, "price reduced" appears to be a popular catch-phrase in the housing market this summer.

The housing slump has resulted in the loss of a number of homebuilding jobs. One builder, for example, has cut its workforce by thousands in a single year.

Julie Ann Amos
August 13th 2007

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