Finance and Economic

Record foreclosures and limited access to credit will make it harder than usual to rebound from this U.S. housing market slump, the worst at least since World War Two, according to a Harvard University study on Monday.

A two-year home price drop is eating into housing wealth, curbing consumer spending and slicing away economic growth. This is unlikely to change until potential home buyers are convinced that prices have stopped tumbling, the study found.

The downturn has room to run.

The highest home loan rates in nine months and strict lending standards are keeping buyers on the sidelines, even after aggressive Federal Reserve intervention and a 16 percent national home price slide from the 2006 peak, by some measures.

“Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability,” Nicolas P payday loan low fee. Retsinas, director of the Joint Center for Housing Studies at Harvard, said in a statement.

“It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets,” he said. “The slump in housing markets has not yet run its full course.”

Price declines and mortgage defaults are the worst on records dating back to the 1960s and 1970s, the study noted. Job losses and falling prices intensify risk of foreclosure.

The number of homes entering foreclosure nearly doubled to 1.3 million in 2007 from about 660,000 in 2005. 

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