Economist: Recession To Extend Throughout 2009

In his Economic Update at the 10th Annual Strategies for Success in Construction Lending Seminar in New Orleans, Doug Duncan, chief economist for Fannie Mae, said the recession will go through the second quarter of 2009 and there will be some positive growth in the third and fourth quarters although the market will still be weak. He said 70% of households currently have no equity, and the rise in delinquencies in the mortgage space is unprecedented. Jobs were still being added in the first half of this year, he told attendees at the conference, hosted by Granite Loan Management. "There are no buyers today, but there are lots of sellers," he said. "The last 18 months has seen policy efforts by the government to get the market functioning to get a price and establish a bottom." The industry needs to leverage real principle in order to know how to value these assets, he added. Mr. Duncan used the analogy of a swimming pool to analyze the mortgage market, saying the water in the pool is dangerously high. "We are adding and subtracting to supply at different speeds. The pipe pumping foreclosures has to get fixed. Drains for new and existing home sales is in a historically tight filter. Not much water is getting through." He said the economic stimulus will likely cost a couple hundred billion if the current decline in gas prices is sustained.