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From The Times
May 29, 2009

Bringing down the house in the US

Ian King, Business commentary

While there are increasing grounds for optimism that the US economy may be past the worst there are also, for those who care to look, still many depressing indicators.

Yesterday brought news that, during the first three months of the year, a record 9.1 per cent of American homeowners were at least 30 days late with their mortgage repayments. A further 3.9 per cent of mortgages were in some stage of foreclosure.

In other words, one in eight US households is either behind on their mortgage or in foreclosure. Equally worryingly, this is no longer a trend restricted to the sub-prime market, with prime fixed-rate loans – those made to the most creditworthy borrowers – accounting for the biggest share of new foreclosures.

This suggests that the US housing market has some way to go before it bottoms. In the absence of any change in demand, once these foreclosed properties hit the market, prices will carry on falling.

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