WASHINGTON - There's no end in sight to the US housing recession and deteriorating credit conditions for consumers and banks may prolong a period of slow economic growth, the International Monetary Fund warned yesterday.
"At the moment, a bottom for the housing market is not visible," the IMF said in its Global Financial Stability Report. "Stemming the decline in the US housing market is necessary for market stabilization as this would help both households and financial institutions to recover."
The IMF, which a year ago failed to foresee the depth of the subprime mortgage collapse, stood by its April forecast for about $1 trillion in losses stemming from the US mortgage crisis. While US policy makers have helped contain the losses, "credit risks remain elevated" and banks need to raise more capital, the Washington-based lender said.
"The growing concern is that, with delinquencies and foreclosures in the US housing market rising sharply, and house prices continuing to fall, loan deterioration is becoming more widespread," the IMF said.
Jaime Caruana, head of the IMF's capital market division, said US housing data showed few signs of improvement. "Some indicators continue to go south," he said.
Falling share prices are making it harder for banks to raise capital, increasing the risk of a downward spiral in the global economy, the IMF said. The outlook for banks may make investors reluctant to provide fresh funds needed to restore the strength of financial institutions.
Congress last week acted to stem foreclosures and aid