Housing headed for worst in half century: Rosengren
HARTFORD, Conn (Reuters) - The U.S. housing market is headed for its worst performance in 50 years, and the drop in home prices could accelerate if the economy weakens, Boston Federal Reserve President Eric Rosengren said Tuesday.
He said previous downturns in the mortgage sector were generally associated with hard economic times, although he steered clear of predicting a recession.
"History may or may not repeat itself," he told an audience of industry executives at a meeting of the Connecticut Business and Industry Association.
"Since prices have declined substantially even in a relatively benign economic environment, one cannot discount the possibility that they could fall more rapidly should economic performance not remain strong in 2008."
On the positive side, Rosengren noted that the current housing debacle has taken place amid a relatively stable labor market, although he observed that Friday's disappointing jobs report could signal a shift.
Rosengren outlined some of the effects of the mortgage meltdown on the financial markets including the effects of derivative securities, saying that past experience suggests prompt recognition of losses would be optimal.
He took a swipe at those who said the events currently underway could never take place.
"On our list of New Year's resolutions, I would include not listening to pundits who claimed 1. that housing prices could not go down nationally 2. that triple-A ratings meant no default risk and 3. that calculating fair market value was easy for mortgage products."
(Reporting by Pedro Nicolaci da Costa; Additional reporting by Kevin Plumberg, Editing by Chizu Nomiyama,)
