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US housing woes 'far from over' | |
(about 2 hours later) | |
The full impact of financial market turmoil "has yet to play out", a top US official has said. | |
Treasury undersecretary for domestic finance Robert Steel said that the upheaval caused by housing market troubles was far from over. | |
His comments came as contracts for future US home sales fell to a six-year low in July, highlighting continuing weakness in the US housing market. | |
The data sent the Dow Jones index down by more than 1%. | |
Mr Steel was speaking at a Senate hearing into how people may be hit by market turbulence. | |
'Ultimate impact' | |
Last week President George W Bush set out plans to help people with sub-prime mortgages meet their payments and avoid losing their homes. | |
They included making it easier for some people with good credit ratings who have fallen behind with repayments to refinance their loans. | |
However the Democrats are expected to expand the proposals as anxiety among Americans grows. | |
The deterioration in the sub-prime mortgage market, resulting in a wave of foreclosures, has triggered global stock market instability. | |
It has also heaped pressure on the US Federal Reserve to reduce interest rates, making life easier for companies and homeowners, when it meets later this month. | |
"This process is far from over," Mr Steel told the committee. | |
"The ultimate impact of these events on the economy is yet to play out." | |
Beige Book signal | |
The National Association of Realtors' index of pending home sales, a tally of sales expected in the next two months, hit its lowest level since 2001. | The National Association of Realtors' index of pending home sales, a tally of sales expected in the next two months, hit its lowest level since 2001. |
The figure was down 12.2% on the month before and 16.1% lower than July 2006. | The figure was down 12.2% on the month before and 16.1% lower than July 2006. |
The industry body said the fall was partly due to mortgages falling through because of the current credit squeeze. | The industry body said the fall was partly due to mortgages falling through because of the current credit squeeze. |
But it emphasised that the problems were concentrated in the sub-prime loan market, where loans are offered to those with patchy credit histories. | But it emphasised that the problems were concentrated in the sub-prime loan market, where loans are offered to those with patchy credit histories. |
It added that the majority of prospective homebuyers had not encountered any problems. | It added that the majority of prospective homebuyers had not encountered any problems. |
Our members are telling us some sales contracts are not closing because mortgage commitments have been falling through at the last moment Lawrence Yun, National Association of Realtors | Our members are telling us some sales contracts are not closing because mortgage commitments have been falling through at the last moment Lawrence Yun, National Association of Realtors |
Analysts are looking to the Fed's Beige Book, a gauge of regional economic trends published later on Wednesday, to provide further evidence on the current economic situation. | Analysts are looking to the Fed's Beige Book, a gauge of regional economic trends published later on Wednesday, to provide further evidence on the current economic situation. |
The NAR said the latest sales figures for previously owned homes, which were weaker than analysts had predicted, suggested lenders were taking a tougher stance on home loans. | The NAR said the latest sales figures for previously owned homes, which were weaker than analysts had predicted, suggested lenders were taking a tougher stance on home loans. |
"Our members are telling us some sales contracts are not closing because mortgage commitments have been falling through at the last moment," said Lawrence Yun, the Association's chief economist. | "Our members are telling us some sales contracts are not closing because mortgage commitments have been falling through at the last moment," said Lawrence Yun, the Association's chief economist. |
Wall Street suffered losses in early trading, with the benchmark Dow Jones index dropping more than 150 points. | |
This followed the OECD's decision to revise downwards US growth forecasts for the rest of 2007, citing the economic fallout from the housing slump. | This followed the OECD's decision to revise downwards US growth forecasts for the rest of 2007, citing the economic fallout from the housing slump. |