Can US housing market get worse?
Updated on 16 August 2007
Millions of Americans are struggling to pay their mortgages, after sucessive increases in interest rates.
Mortgate repayments are increasing and repossessions are at an all-time high - and rising - while figures released today revealed the number of new houses being built in the US has slumped to its lowest level in 10 years.
Yesterday, one of America's biggest mortgage companies, Countrywide Financial, admitted it had been forced to borrow almost $6bn from a consortium of 40 banks to keep afloat, causing its shares to plummet - with repercussions for Wall Street and homeowners.
The Dow Jones Industrial Average opened more than 100 points lower following this news. The recent credit crunch has seen smaller rivals collapse.
Stricter lending
Countrywide Financial has also said it has tightened its lending standards so most new home loans will qualify for purchase by mortgage companies Fannie Mae and Freddie Mac.
Countrywide this week said mortgage delinquencies have reached their highest level in more than five years. Dozens of smaller mortgage lenders have quit the industry this year and many have gone bankrupt.
The pain is not restricted just to financial institutions. With the US housing market in its worse slump for 16 years, homeowners have seen their house values decline and defaulters have seen their homes repossessed.
Down - but not out
Countrywide has been under pressure after Merrill Lynch issued a sell rating on the stock, fuelling worries about the biggest US home lender's ability to raise cash to secure short-term funds.
Today, shares of Countrywide fell $3.19 (down 15 per cent) to $17.90 in morning trading on the New York Stock Exchange. They began the year at $42.45.
