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 ongoing 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.