October 12th, 2007 12:25 PM by Manuel Couto, CRS, CRB
By Tabassum ZakariaThu Oct 11, 5:59 PM ET
President George W. Bush on Thursday said weakness in housing markets was regional, not national, and that the solution to the problem was not more regulation but to help people refinance their mortgages.
"The solution it seems like to me is not more government or more regulation, but to help people refinance their homes," Bush said in an interview with CNBC. "Until the supply and demand gets back in balance, still you're going to see some softness, but so far the softness is regional. This is not a nationwide phenomena," he said.
Some regional housing markets are doing "just fine," Bush said. At the same time, the administration is monitoring the housing downturn carefully, he said.
"We're going to make sure that government policy is not counterproductive, but consumers can be helped to stay in their homes," he added.
Bush's comments come as a wave of mortgage delinquencies, tighter credit and an overhang of housing inventories have led to a prolonged slump in U.S. housing markets.
U.S. home foreclosures reached a 32-month peak in August, with California, Florida and Ohio among states hardest hit, according to data collected by RealtyTrac. While the number of foreclosures dropped in September, more filings are expected as loans with adjustable interest rates reset at higher rates, raising payments for borrowers.
Economists expect U.S. residential real estate prices to decline into next year but for sales to rebound in mid-2008.
The housing downturn and associated financial turmoil -- as delinquent loans have soured an array of investments and securities around the world -- have led to worries the economy could be headed into recession.
The Federal Reserve cut benchmark overnight interbank borrowing costs dramatically last month to 4.75 percent in an effort to offset financial market turmoil. Housing weakness appears likely to be deeper and last longer than previously expected, the Fed said this week.
The Bush administration on Wednesday announced that a coalition of mortgage service companies, counselors and trade organizations was banding together to offer help to hard-pressed homeowners.
In the interview, Bush declined to comment on the Fed's rate decision, saying the central bank is politically independent and that he does not give the Fed instructions.
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