Tighter Lending Stalls Housing Recovery

Rising foreclosures and tightening credit standards are making it more difficult for the housing market to recover from the current downturn than it has been for the market to rebound from previous slowdowns, according to a Harvard University study.

“Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability,” Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard, said in a statement.

“It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets,” he said. “The slump in housing markets has not yet run its full course.”

The center predicted that income growth over the next 10 years would be constrained, reducing demand for homes. Much of employment growth will be in part-time and low-wage positions, the study said.

“The somber conclusion is that if the economy slips into recession or job losses keep racking up, household growth and homeownership demand could fall even more,” the center said in the release.

Source: Reuters News, Lynn Adler 06/23)