HOUSING SLUMP THREATENS U.S., GLOBAL ECONOMY

HEATHER STEWART, OBSERVER, UK - The downturn in the US housing market
will force businesses to slash 73,000 jobs a month in the new year and
could be more damaging to the world economy than the dotcom crash,
economists have warned. After official figures last week showed that the
number of new homes sold in July was 22 per cent lower than a year
earlier, while prices were almost flat, fears are mounting that the
'orderly' housing slowdown predicted by the Federal Reserve will become
a full-blown crash.

'Things do seem to be getting worse very quickly. Freefall is a strong
word, but I think it's the right one to use here,' said Paul Ashworth,
chief US economist at Capital Economics.

House prices have been rising at unprecedented double-digit rates in
recent years, giving homeowners massive windfalls and supporting a wave
of investment in new construction. However, the number of unsold new
homes is now at a 10-year high.


Ashworth reckons 30 per cent of all the jobs created since the end of
the last recession in 2001 - 1.4 million - have been in sectors related
to the housing market boom, from construction to DIY stores. As the boom
runs out of steam, Capital calculates that 73,000 jobs a month will be
lost. . .

Stephen Roach, chief economist at Morgan Stanley, predicts that the
property slowdown will shave at least 2 percentage points off GDP growth
next year, taking the US perilously close to recession, as construction
spending plummets and homeowners lose the cushion of extra wealth that
comes from rapid price rises.

http://observer.guardian.co.uk/business/story/0,,1859024,00.html