US housing upturn unlikely before '09

August 27, 2008
US housing upturn unlikely before '09
Recently-passed law to avert foreclosures a key move: official

(WASHINGTON) A recovery from the worst US housing slump since the
Depression is unlikely until 'well into 2009,' Housing and Urban
Development Secretary Steve Preston said on Monday.

'I think we're right in the middle of it, and I think we have a ways
to go before we start seeing a turnaround,' Mr Preston said in an
interview in Washington. 'We'll be well into 2009 before we see some
real energy in this market.'

A slowdown in home sales and a drop in prices has contributed to
record foreclosures as borrowers struggle to meet their monthly
mortgage payments.

Mr Preston said a foreclosure-prevention law Congress passed last
month will be important in aiding mortgage-finance companies Fannie
Mae and Freddie Mac, which are supporting most new mortgages.

'We have to begin seeing the inventory of new homes begin to reduce
so that we can see the buying activity begin to pull us out of the
situation we're in,' Mr Preston, 48, said.

US banks repossessed almost three times as many US homes in July as a
year earlier, and the number of properties at risk of foreclosure
jumped 55 per cent, California-based RealtyTrac Inc said in an Aug 14
report.

The law enacted last month creates a Federal Housing Administration
programme in HUD to insure as much as US$300 billion in refinanced 30-
year, fixed-rate mortgages for 400,000 struggling homeowners. The law
lets the US inject capital into Fannie and Freddie through stock
purchases or government loans.

Mr Preston deferred to the US Treasury and Federal Housing Finance
Agency, the new regulator of Fannie Mae and Freddie Mac, on whether
the companies should be bailed out or nationalised.

'I don't know what the future holds for them,' he said. Mr Preston
said 'it's possible' he may propose other solutions to the housing
crisis, without being specific.

'Many of the policy solutions are out there and working,' he
said. 'My guess is that you're going to see more fine-tuning of these
programmes to ensure that they're working, rather than large-scale
change.'

Other programmes include an industry-led effort called the Hope Now
Alliance organised last year to help troubled homeowners modify their
mortgages to make monthly payments more affordable.

A programme HUD started a year ago called FHA Secure is also aimed at
averting foreclosures by helping borrowers with adjustable-rate
mortgages refinance into FHA-insured mortgages.

Mr Preston, who was head of the US Small Business Administration, in
June replaced Alphonso Jackson, who quit amid a federal criminal
probe into contracts awarded by the agency.