Some will blame current economic pressure on a subprime market that was more enthusiastic than realistic. Housing starts are down with consumer confidence following suit. According to The Conference Board its March [2007] consumer confidence index fell to 107.2, the lowest level since November and a decline that was larger than Wall Street expected.
The good news is the Dow has performed well in the midst of this news while labor statistics remain strong.
Federal Reserve Chairman Ben Bernanke’s testimony before Congress on March 28th, 2007 found him concerned about the impact of defaults on subprime loans. Bernanke indicated that, Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear. The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes.
Interestingly, news of the bubble pop in subprime lending is rippling around the world. The European...
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