Mortgage lenders see in recession through mid-2009

SAN FRANCISCO: The US economy is currently in a recession that will not end until the middle of next year when a slow recovery begins, the Mortgage Bankers Association said on Tuesday.

"A recession appears to be under way, as evidenced in rising unemployment, contracting manufacturing activity and declining inflation-adjusted consumption spending," said Jay Brinkmann, the trade group's chief economist, at the group's annual convention.

Unemployment will climb to 7.8 percent by early 2010 before declining, the MBA said. The housing sector will see more pain ahead, Brinkmann said, with the worst downturn in new home sales and construction yet to come.

New, single-family home sales will hit bottom in the middle of next year, falling to an annual rate of 413,000, Brinkmann predicted. The pace of those sales hit 460,000 in August. The low point for the existing-homes market was set in mid-2008 when sales hit a 4.91 million unit rate, the MBA said.

The bottom of the home building market will be reached next summer when total housing starts set a 800,000 annual pace, Brinkmann told reporters at the trade group's annual meeting in San Francisco.

September home starts set a seasonally adjusted annual rate of 817,000 units, their slowest pace since January 1991. But Brinkmann also said he expects the foreclosure rate to be higher a year from now. "My expectation is, nationally, we are going to be up," he said.