Housing Market: Can It Really Get Any Worse?

An even gloomier scenario may be in store for an already ailing U.S. housing market if the overall economy slips into a recession, according to UBS Securities analysts.

Falling home prices, soaring foreclosures at a time of tighter lending and rising unemployment are all weighing heavily on an already troubled housing sector, the analysts said during a conference call recently.

Lack of funding is the biggest problem facing the housing market right now, according to the analysts, with subprime and Alt-A securitized markets shutting down and banks being forced to cut their mortgage lending dramatically due to capital constraints. So-called Alt-A loans are made to borrowers with less than prime credit ratings but who are above subprime.

Fannie Mae and Freddie Mac have also cut back their lending to stressed subprime and Alt-A borrowers with low incomes and high loan-to-value ratios.

Foreclosures, which have been building over recent months as borrowers default on risky subprime home loans, are not expected to peak until late 2008 to mid-2009.

So where do you see the housing market? We’d love to hear your opinion. Use the comment link below to sound off about it. Your email address will not be published here, even though it is required in order to post your comment.