Boom2Bust.com

Countrywide CEO Hints At Recession

Countrywide Financial Corp. Chief Executive Angelo Mozilo earlier today warned that the ongoing U.S. housing market slump could lead to recession. On CNBC, Mozilo said the housing market is not getting any better and that there is a “very serious situation going on.” When asked if there would be a recession, Countrywide’s CEO said:

“I think so… I know I’ve been proven wrong so far, but I can’t believe that when you’re having a level of delinquencies, foreclosures - equity has disappeared, equity is gone, the tide has gone out - that this doesn’t have a material effect on the psyches of the American people, and eventually on their wallet.”

Mozilo added that, “I’ve seen this movie before, and the ending of the movie always ends up in some form of recession.” He concluded that the markets are in “one of the greatest panics I’ve ever seen in 55 years in financial services.”

These statements come in the wake of a report issued Tuesday by RealtyTrac, the online marketer of foreclosure properties. RealtyTrac’s data shows that 179,599 foreclosure filings (which include default notices, auction sale notices, and bank repossessions) were reported nationwide in July for a 9% increase over June and an astonishing 93% jump year-over-year. As a result, RealtyTrac has raised its forecast on the number of U.S. foreclosures for 2007. Rick Sharga, RealtyTrac’s vice president for marketing, told CNN Money on Tuesday that, “It’s trending close to 2 million now, 60 percent more than last year.” Moody’s Economy.com predicts an even higher number at 2.5 million foreclosures for the year. Back on June 5 a Boom2Bust.com post talked about the predictions by Housing Predictor.com and the Center for Responsible Lending, which called for millions of residential property foreclosures in the next couple of years, effectively wiping out the number of homeowners (2 million) thought to have been created by the housing boom.

Two new readings on the U.S. housing market are to be released in coming days. Tomorrow new-home sales will be reported, followed by existing-home sales next Monday. The Wall Street Journal said today that, “Economists expect the data to be weak, and are looking more closely at the effects on the broader economy.”