A Strategy for the 2011 Economic Recovery, January 28, 2011, [See also related charts in PDF] – Joseph S. Tracy, Executive Vice President, Federal Reserve Bank of New York
“We should keep in mind, though, that there is considerable uncertainty associated with every economic forecast. There are both upside and downside risks that could cause actual economic growth this year to deviate from the consensus forecast. One important downside risk to the outlook is associated with housing markets. Following the end of the home buyer tax credits, there was a sharp drop-off in home sales. In addition, the firming of house prices noted earlier has given way to renewed house price declines in many markets (Chart 27). There still remains a significant excess supply of housing that will exert downward pressure on house prices and new construction (Chart 28). Given the very low level of new home construction, the primary driver of this excess supply of housing is the on-going foreclosure process. The foreclosure pipeline continues to grow (Chart 29). How far along are we at resolving the foreclosure problem? Total completed foreclosures including short sales and deeds-in-lieu from the beginning of 2008 until the end of the third quarter of 2010 represent around 58 percent of all foreclosure starts over that same period. In addition, in each quarter the pace of foreclosure starts has exceeded the pace of completed foreclosures. At best, then, we are only halfway through the resolution process.”
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