SocraticGadfly: Recession more likely — and around party convention time

December 06, 2007

Recession more likely — and around party convention time

Moody’s expects a nationwide housing price drop of 15 percent by 2010 and a California/Florida drop of as much as 30 percent, with full recovery not until 2010.
House prices are forecast to fall 13% from their peak through early 2009. After accounting for incentives home sellers are offering buyers, effective declines peak-to-trough will total well over 15%, the report said.

Punta Gorda, Fla., and Stockton, Calif,, are the hardest hit markets in the United States, with price declines from peak-to-trough forecast at 35.3% and 31.6%, respectively.

"This is the most severe housing recession since the post-World War II period," Moody’s Mark Zandi told Reuters.

Remember, the freeze doesn’t apply to already-delinquent homebuyers, nor does it apply to upside-down loans. And, at a 15 percent drop, not to mention 30 percent in California and Florida, many loans will be upside down.

As for a recession possibility?

The same Moody’s report says housing will knock 1.5 percentage points off economic growth next year, most of that by before the end off summer.

So, a recession — right around the Republican and Democratic national conventions. And, a “reset freeze” that’s like a Band-Aid on a horror flick chainsaw wound.

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