Job losses muddy outlook for U.S. housing comeback

[alienlovechild 75]

MIAMI (Reuters) - A pickup in U.S. home sales has kindled hopes for a housing recovery, but plunging prices, rising unemployment and a new wave of foreclosures are clouding prospects for a quick end to the American real estate debacle.

"We're not at the bottom and anybody that's trying to call the bottom right now is crazy," said Jack McCabe, a real estate consultant based in Deerfield Beach, Florida.

"There's a huge foreclosure wave still ahead in the next 12-18 months and still a lot of excess inventory," he added.

Housing is at the heart of the 17-month-old U.S. recession and is key to a turnaround in the broader economy.

But upbeat talk is undermined by data like the latest S&P Case-Shiller home price index, which recorded a 19.1 percent drop in the first-quarter compared to the same year ago period. It was the biggest decline in the index's 21-year history.

But the surge was fueled by a 39 percent year-over-year drop in median sales prices and many people in Miami -- which ranks among the poorest U.S. cities -- are among homeowners struggling to make ends meet as the U.S. unemployment rate heads into what may soon be double digits.

One in eight households with a mortgage ended the first quarter late on loan payments or in the foreclosure process, the U.S. Mortgage Bankers Association said on Thursday.

Foreclosures on fixed-rate mortgages, given to solid borrowers with good credit, represented the largest share of new foreclosures for the first time since the rapid growth and ensuing collapse of the subprime "toxic" loan market.

Mark Zandi, chief economist of Moody's Economy.com, saw the mounting foreclosure crisis as the most significant threat to the developing economic recovery. He said that as foreclosures mounted, they undermined house prices, wealth and the viability of the country's financial system.

"The driving forces behind these foreclosures are millions of homeowners under water and surging unemployment, and/or underemployment. People won't default on their loan unless they're under water," said Zandi, referring to borrowers who owe more on their homes than the properties are worth.

In Maricopa, Arizona, realtors Aziz and Deborah Farhat said the once booming real estate market less than an hour's drive from Phoenix peaked in October 2005. Back then, a three-bedroom home went for $225,000 to $250,000 compared to a current average of $99,000.

"At the moment it's flattening," Deborah Farhat said, adding that the price slide had started to level off in March.

http://www.reuters.com/article/domesticNew...=22&sp=true

[alienlovechild 75]

You know it's a bad economy when people here are too beaten down to even argue what should be done next.