Sunday, August 06, 2006

The Providence Journal - "Homebuilding industry is taking a hit" (8-2-06)

"Going forward, many economists say, the biggest question is whether the orderly real-estate slowdown the Fed has engineered thus far will continue. 'Outside the threat of surging energy prices,' Zandi said, 'the most significant threat to the expansion is that the housing correction turns into a housing crash.'"

"The fact that mortgage rates remain low by historical standards offers one reason to doubt that a crash will happen. The average rate on a 30-year conventional mortgage was 6.8 percent last week, up from 5.7 percent a year earlier, according to the Fed."

"On the other hand, the boom of recent years has pushed housing prices out of reach for many families along the coasts. Already, some homeowners have resorted to creative loans, such as interest-only mortgages, to afford a house, and even modest increases in mortgage rates have the potential to cause a significant drop in demand for new houses."

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