Is the end in sight?
Don’t count on any major rebound in the housing market but the end of declining sales and home prices may be not so far in the distant future. The major slump in the housing market is nearing an end and should not have a significant impact on the overall economy, Treasury Secretary Henry Paulson said Wednesday. Paulson refused to comment specifically on the market impact of troubles confronting two large Bear Stearns hedge funds that invested heavily in subprime mortgages — loans made to borrowers with spotty credit histories.
"We have had a major housing correction in this country," Paulson said in an interview with a small group of reporters at the Treasury Department. "I do believe we are at or near the bottom." Paulson said he realized there would be losses along the way but said he believed those losses have been "largely contained." "It doesn't pose a risk to the economy overall," he said.
Paulson's comments echoed remarks by Federal Reserve Chairman Ben Bernanke, who said in a June 5 speech that he believed the slump in housing would last longer than expected but that so far, "we have not seen major spillovers from housing onto other sectors of the economy."
The overall economy grew at a barely discernible 0.6 percent annual rate in the first three months of this year, the worst showing in more than four years. But many analysts believe growth has picked up significantly in the spring to around 3 percent or better.
Paulson said the U.S. economy is being helped by strength in other parts of the world, noting that unemployment in Europe is at a 15-year low and global financial markets have large pools of money to invest. But he cautioned that investors must remain alert to risks given that there has not been any serious financial turmoil for quite a while. "We have had benign markets for some time. That means there is less discipline," he said. "We have to be vigilant about risk, but we need to recognize this is a strong global economy."
"We have had a major housing correction in this country," Paulson said in an interview with a small group of reporters at the Treasury Department. "I do believe we are at or near the bottom." Paulson said he realized there would be losses along the way but said he believed those losses have been "largely contained." "It doesn't pose a risk to the economy overall," he said.
Paulson's comments echoed remarks by Federal Reserve Chairman Ben Bernanke, who said in a June 5 speech that he believed the slump in housing would last longer than expected but that so far, "we have not seen major spillovers from housing onto other sectors of the economy."
The overall economy grew at a barely discernible 0.6 percent annual rate in the first three months of this year, the worst showing in more than four years. But many analysts believe growth has picked up significantly in the spring to around 3 percent or better.
Paulson said the U.S. economy is being helped by strength in other parts of the world, noting that unemployment in Europe is at a 15-year low and global financial markets have large pools of money to invest. But he cautioned that investors must remain alert to risks given that there has not been any serious financial turmoil for quite a while. "We have had benign markets for some time. That means there is less discipline," he said. "We have to be vigilant about risk, but we need to recognize this is a strong global economy."
posted by Ken Calhoon at 6:59 AM
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