Housing market slumping
Rising interest rates are putting a damper on buying; stubborn sellers having to lower prices.
Martin Crutsinger / Associated Press
WASHINGTON -- The "For Sale" signs are staying out longer, while house prices are easing as sellers try to lure buyers.
The big question now: Will the nation's five-year housing boom turn into a devastating bust that could derail the overall economy?
"We recognize the risk ... and we are watching it very carefully," Federal Reserve Chairman Ben Bernanke told Congress recently.
The Fed's interest rate increases, which have helped push mortgage rates to the highest levels in more than four years, are putting a damper on housing.
The central bank acknowledged that fact Tuesday when it decided against raising a key short-term rate for an 18th time.
The concern is that the already sizable inventory could worsen as millions of Americans with adjustable rate mortgages, taken out when interest rates were at four-decade lows, suddenly find they can't meet new higher monthly payments.
"So far, the correction in housing has been orderly, but there is a significant risk that this orderly correction could become more chaotic," said Mark Zandi, chief economist at Moody's Economy.com.
David Lereah, chief economist for the National Association of Realtors, predicts the sales slowdown is about to bottom-out. He said homeowners are realizing they need to lower prices.
"We are going from a seller's market to a buyer's market," he said. "It looks like the worst is behind us and sales are starting to level off."
That may leave sellers and real estate agents longing for the old days. Many
economists are stopping short of predicting a wholesale bust.
"There is no evidence that prices are going to collapse," former Fed Chairman Alan Greenspan said earlier this year.
Rising interest rates are putting a damper on buying; stubborn sellers having to lower prices.
Martin Crutsinger / Associated Press
WASHINGTON -- The "For Sale" signs are staying out longer, while house prices are easing as sellers try to lure buyers.
The big question now: Will the nation's five-year housing boom turn into a devastating bust that could derail the overall economy?
"We recognize the risk ... and we are watching it very carefully," Federal Reserve Chairman Ben Bernanke told Congress recently.
The Fed's interest rate increases, which have helped push mortgage rates to the highest levels in more than four years, are putting a damper on housing.
The central bank acknowledged that fact Tuesday when it decided against raising a key short-term rate for an 18th time.
The concern is that the already sizable inventory could worsen as millions of Americans with adjustable rate mortgages, taken out when interest rates were at four-decade lows, suddenly find they can't meet new higher monthly payments.
"So far, the correction in housing has been orderly, but there is a significant risk that this orderly correction could become more chaotic," said Mark Zandi, chief economist at Moody's Economy.com.
David Lereah, chief economist for the National Association of Realtors, predicts the sales slowdown is about to bottom-out. He said homeowners are realizing they need to lower prices.
"We are going from a seller's market to a buyer's market," he said. "It looks like the worst is behind us and sales are starting to level off."
That may leave sellers and real estate agents longing for the old days. Many
economists are stopping short of predicting a wholesale bust.
"There is no evidence that prices are going to collapse," former Fed Chairman Alan Greenspan said earlier this year.
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