{"id":199,"date":"2008-02-19T16:12:05","date_gmt":"2008-02-19T16:12:05","guid":{"rendered":"http:\/\/www.the-finance-zone.co.uk\/uncategorized\/housing-meltdown-hits-us-economy\/"},"modified":"2008-02-19T16:12:05","modified_gmt":"2008-02-19T16:12:05","slug":"housing-meltdown-hits-us-economy","status":"publish","type":"post","link":"https:\/\/the-finance-zone.co.uk\/index.php\/2008\/02\/19\/housing-meltdown-hits-us-economy\/","title":{"rendered":"Housing Meltdown Hits US Economy"},"content":{"rendered":"

The sudden tightening of credit on high-risk sub-prime mortgages has led to a property price crash in the US, with devastating effects on the whole economy. <\/strong><\/p>\n

The unprecedented decline in US house prices may also lead to further pain for financial institutions, who collectively own more than $1 trillion worth of sub-prime debt.<\/p>\n

Housing markets are local, and few areas have experienced the 30% decline in average house prices that has hit Cleveland, the sub-prime capital of the US<\/p>\n

But average house prices across the US are declining for the first time since the Great Depression in the 1930s, and the magnitude of the collapse has surprised experts.<\/p>\n

There is nearly a year’s supply of unsold houses standing vacant.<\/p>\n

And the housing crash is now extending to the formerly “hot” housing markets in Southern California, Arizona, Nevada and Florida, where expanding populations and a strong economy were expected to keep prices high.<\/p>\n

Mark Zandi, an economist at Moody’s, who is tracking the housing market, expects the fall in house prices to accelerate from 5% this year to 10% in 2008.<\/p>\n

He says that prices could end up 10-15% lower than the peak of 2006 – if policymakers move quickly to stem the wave of foreclosures.<\/p>\n

But if they don’t, and if interest rates are forced up by the inflationary worries, he says prices could fall by 15% to 20%. \"house-for-sale.jpg\"<\/p>\n

Mr Zandi says there are three factors that have caused the property crash:<\/p>\n