Most analysts believe the housing crunch will get worse before the market starts to recover. Analysts said a variety of factors, including whether the general economy dips into a recession or credit becomes even tighter, make it difficult to predict when the market will hit bottom. "What we're seeing is that with the higher interest rates and tighter lending criteria, qualifying for loans is becoming more of an issue," said Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate. That's been the case with subprime loans for a while, Conway said, as reflected in the growing inventory of unsold homes priced at $500,000 or below in Los Angeles County. The collapse of several subprime lenders and tighter lending practices implemented by other established mortgage companies are contributing to the slowdown. "It's pushed out the time when we expect the market to stabilize," Conway said. "We had been expecting it sometime next summer or fall. But that may be pushed back because of the problems" among lenders, she said. The rate of foreclosures and defaults could accelerate as billions of dollars in mortgages come to the end of their initial, two-year fixed interest period and reset to higher rates, analysts said.
September 13, 2007