Economist: Worst May be Yet to Come

The housing downturn is expected to shave about three-fourths of a percentage point off of economic growth during the first half of this year, according to the chief economist of Mesirow Financial here.

Economist Diane Swonk believes that the impact on the economy will be less dramatic in the second half of the year, reducing gross domestic product growth by less than one-quarter of a percent.

Seasonably cold weather in March, traditionally the start of the spring home buying season, slowed homebuying at the start of the normal busy period, she said.

"Separately, recent problems in the subprime mortgage market have raised questions regarding borrowers' ability to obtain credit," she said in a newsletter addressing the fallout from a slowing housing sector.

"The worst of the fallout for the housing market correction is likely to be felt in the months ahead," she said.

On the positive side, Ms. Swonk said that the economy is well positioned to pick up steam again once the losses related to the housing slowdown start to dissipate.

Residential Investment Still Falling Until Late In 2007

2006 Q1 -0.3%

2006 Q2 -11.1%

2006 Q3 -18.7%

2006 Q4 -19.8%

2007 Q1 -16.2%

2007 Q2 -10.9%

2007 Q3 -4.5%

2007 Q4 -0.6%

Source: Bureau of Economic Analysis/Mesirow Finance (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com