THE US economy grew slower than Wall Street analysts had expected in the third quarter, and the housing market continued to struggle, highlighting the challenges of sustaining a fragile recovery.
Analysts, who had initially forecast that 2010 would see a modest upturn in housing, are now predicting that prices will decline in 2011 by as much as 10 per cent, as a record number of distressed properties floods the market.
The continued weakness has prompted some Wall Street economists to call for major intervention by Washington to head off prolonged stagnation.
Richard Berner, the chief US economist at Morgan Stanley, said that without new government initiatives to reduce interest payments and principal balances, the housing market would remain locked in a “vicious circle” in which supply could outstrip demand for years to come.
Sales of existing homes grew by 5.6 per cent in November to a seasonally adjusted 4.68 million properties, but that is 28 per cent below levels of a year ago.
Although house prices rose 0.7 per cent in October, the index compiled by the Federal Housing Finance Agency has fallen 3.4 per cent over the preceding 12 months.
US economic growth was revised upward by less than Wall Street analysts had expected for the third quarter.
Although the Bureau of Economic Analysis raised its estimate from 2.5 per cent to 2.6 per cent, many Wall Street analysts had been hoping for 3 per cent growth. – (Copyright The Financial Times Limited 2010)
