Housing woes cited for recession

BY ANDREA HOLECEK, Times of Northwest Indiana 
holecek@nwitimes.com

Housing and home mortgage sector factors that can be traced back to 2006 are leading causes of the nationwide economic downturn, some economists say.

There was too much lending and housing prices were too high, leading to more people owning homes than should have, Jack Ablin, executive vice president and chief investment officer for Chicago-based Harris Private Bank, said during a speech in Hobart Thursday. He added he believes the nation is in a recession, but that it should begin to subside in the third quarter of this year and be over by the end of the fourth year.

"In 2008 we're starting to close the gap. For the most part, the worst of the housing problem is behind us; there will be a slight undervaluation for a while because of the supply on hand.'

Northwest Indiana's existing home sales dropped 15 percent in 2007 from the prior year's level, but its housing market is faring a better than some other areas of the nation, said Peter Novak, chief executive officer of the Greater Northwest Indiana Association of Realtors.

"Existing homes sales continue to remain down in terms of number of units sold, but prices have remained stable," Novak said. "Typically, when you have high inventory, prices are down, but we're not seeing that. We've been definitely bucking the national trend."

He said it's more difficult to get a home loan than it was nine months ago and down payments on building lots have doubled from to 10 percent from 5 percent.

"In the last 10 years, interest rates were low, homes were appreciating and people were buying larger and larger homes," Novak said. "It was so easy to get loans that people bought more than they could really afford and when something happened they couldn't pay for it."

New construction is down and developers aren't building spec homes as they have in the past, he added.

On Thursday, Cressmoor Estates developer Randy Hall cited the state of the economy as the reason he wants to delay building a 462-unit subdivision at 37th and Lake Park avenues in Hobart.

"Banks aren't excited about financing development right now," Hall told the Hobart Plan Commission.