No end in sight to US housing slump: IMF

July 30, 2008
No end in sight to US housing slump: IMF

WASHINGTON - THE International Monetary Fund (IMF) has said there is
no end in sight to the US housing recession and warned that
deteriorating credit conditions for consumers and banks may prolong a
period of slow economic growth.

'Stemming the decline in the US housing market is necessary for
market stabilisation as this would help both households and financial
institutions to recover,' it said in its Global Financial Stability
Report, released on Monday.

'The growing concern is that, with delinquencies and foreclosures in
the United States housing market rising sharply and house prices
continuing to fall, loan deterioration is becoming more widespread,'
it added.

The IMF also stood by its April forecast of about US$1 trillion
(S$1.36 trillion) in losses stemming from the US sub-prime mortgage
crisis.

US policymakers have helped contain the financial losses but 'credit
risks remain elevated' and banks need to raise more capital, it said.
But falling share prices are making it harder for banks to do so.