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The ongoing housing market slump in the United States may have a damaging affect on the economy there for some time to come, it was warned on Thursday.
It was revealed Wednesday that new house sales continued to fall in June.
Figures showed that the 2.2 percent fall off was the biggest in five months.
The price of new houses was also down. The mean price of a new home was down 2.2 percent to $237,900 year-on-year.
The actual number of single family homes sold was down 6.6 percent in June.
This latest news will do nothing to help an already shaky mortgage market, with an increased number of defaulted home loans expected in the coming year.
There were about 900,000 defaults last year and this is expected to rise to 1.2 million this year and 1.3 million next year. Economy.com chief economist Mark Zandi told the associated press that the subprime market could be hit very hard. He added that he expects most defaults to be in California, Las Vegas, Florida and New York.
There are also mounting fears that the housing slump could wipe billions of investment dollars on Wall Street. Zandy said that hedge fund investors could be hit for up to $125 billion over the coming year.
He expects that house prices will continue to fall for about another year. This is only likely to worsen the current situation as homeowners struggle to sell their properties and default on their mortgage payments.
06:23
Posted on Jul-27-2007
