The housing market is in a downturn, and it’s having a big impact on Wall Street and our economy. Creighton University Economist Ernie Goss says problems started when short-term interest rates increased. He says it’s driven up the interest rates on "sub-prime" loans, mortgages offered to lenders who don’t have not a really good financial record and lack the income to pay for the housing they’re in.
Goss says we were seeing signs that the housing market was improving but with the recent troubles facing those sub-prime lenders, that has now reversed. He says we won’t be hit quite as hard in the Midwest as in other parts of the country. It’s going to be a very slow movement upward, he predicts, saying the condominium market in particular is one of the areas ripe for some of the problems in the subprime area.
While new mortgage foreclosures shot to a record high in the final quarter of last year, Goss says the situation will be worse on the east and west coasts. He says this part of the country is doing better, and hasn’t had as much growth in the subprime lending area. We didn’t see the housing "bubble" here as much as in the rest of the nation so likewise the negative or downturn won’t be as large. Goss says thirty subprime lenders have gone out of business since the first of the year.