Housing mart outlook generates shockwaves

Oct 17, 2007 | 11:02 AM | Rory Carroll

Treasury Secretary Henry Paulson's warning that the housing correction will hurt many homeowners and the overall U.S. economy for "some time to come" sent shockwaves through Washington.

"Despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy," Paulson said during a speech at Georgetown Law Center. "The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth."

He said the housing correction has its roots in an eight-year period of exceptional home price appreciation that was fueled by an abundant supply of easy credit. Speculation also played a significant role, as the share of buying activity by investors or individuals buying second homes more than doubled from 2000 to 2005. "Homebuilders responded to the extraordinary demand for more and larger homes as if it would last forever," he said.....

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