Housing Still Slumping; Sen. Dodd Takes On "Predatory" Lending

Three economists stated yesterday that the housing market has not yet bottomed and is unlikely to begin a recovery until the middle of this year. Senate Banking Committee Chairman Christopher Dodd also said yesterday that the growth of the "predatory" sub-prime lending market has victimized minority, immigrant and elderly homeowners. Sector weakness is forecast to encompass existing-home sales, new-home sales and housing starts as well as home prices, which are projected to show their first-ever full-year national decline. David Seiders, chief economist for the National Association of Home Builders, claims excess inventory is a persistent and serious problem. He points out, however, that "GDP growth, unemployment, the overall inflation situation and interest rates" have all been positive, indicating the economy is weathering the housing crisis well. Senator Dodd has taken the lending industry to task and charged the government with responsibility to tackle "irresponsible lending practices [that] are creating a crisis for millions of American homeowners." The Mortgage Bankers Association is resistant to any new underwriting standards that it claims could "stifle innovation and take good financing options out of the hands [of] homeowners." Rev. Jesse Jackson concurs with Dodd, calling predatory lending "targeted economic exploitation."

Sources: MarketWatch (I, II)
Commentary: Foreclosure Threat Ominous for Subprime Borrowers, A Look at Foreclosures per State, Homebuilder Sentiment and the Stock Market
ETFs to watch: iShares Cohen & Steers Realty Majors Sector Index Fund (ICF), iShares Dow Jones US Real Estate Index Fund (IYR), DJ Wilshire REIT ETF (RWR), Vanguard REIT ETF (VNQ), iShares Dow Jones US Home Construction (ITB), SPDR Homebuilders (XHB), PowerShares Dyn Building & Construction (PKB)

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