Housing woes take bigger toll on economy than expected: Paulson

WASHINGTON : The slump in US real estate is persisting longer than expected, and may lead to over one million foreclosure notices this year for homeowners, Treasury Secretary Henry Paulson said on Tuesday.
"The ongoing housing correction is not ending as quickly as it might have appeared late last year," Paulson said in remarks prepared for delivery in a speech at the Georgetown University Law Centre. "
And it now looks like it will continue to adversely impact out economy, our capital markets and many homeowners for some time yet. Even so, I believe we have a healthy, diversified economy that will continue to grow."
Paulson said home foreclosures are rising sharply, especially on sub-prime loans granted to people with weak credit histories.
"Current trends suggest there will be just over one million foreclosure starts this year - of which 620,000 are sub-prime," he said.
He said it was a "troubling" statistic that two million adjustable-rate loans will be reset to higher rates in the next 18 months, and that it was unclear how many of those might put homeowners in jeopardy of foreclosure.
The troubles in the sector have meant weakness in home construction and turmoil in the financial sector, with the end of the problems not yet in sight, Paulson stated.
"Despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant risk to our economy," he said.
"The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth."
Paulson said efforts are being made in the public and private sectors to help homeowners avert the loss of their properties, but that more needs to be done to avert a future crisis.

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