Housing picture worsens

Associated Press

May 07, 2008 10:04 am

— WASHINGTON — The outlook for the housing market darkened further Tuesday as the nation’s largest buyer of home mortgages said it racked up more than $2 billion in quarterly losses and forecast a steeper drop in home prices this year.
If Fannie Mae’s prediction proves true, the real estate woes could further shake the confidence of consumers already stung by rising food and fuel prices, and an anemic job market.
Home foreclosures are accelerating around the country, adding to the glut of unsold properties and further depressing prices. As a result, a growing number of homeowners are saddled with loans that outstrip the value of their houses.
“I think that right now we are in the belly of the cycle,” Fannie Mae’s president and CEO, Daniel Mudd, said during a conference call with analysts.
Mudd said home prices fell in the first quarter “faster than anyone anticipated” and that the company foresees a decline of 7 percent to 9 percent for the year, compared with earlier forecasts of a 5 percent to 7 percent drop.
The rising tide of delinquencies and foreclosures poses considerable dangers to the broader economy, Federal Reserve Chairman Ben Bernanke warned on Monday as he urged Congress to take additional steps to alleviate the problems.