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Unemployment to weigh on housing

Fitch warns of 'severe recesssion'

The U.S. is entering a "severe recession" driven by contraction in credit and a financial crisis with few historical parallels, making it difficult to forecast its length and severity, analysts at Fitch Ratings say. The worsening outlook for unemployment means home prices may fall harder and take longer to bottom than previously anticipated, Fitch analysts said. In a special report assessing the outlook for structured finance -- mortgage-backed securities and similar investments that fund credit-card debt, auto loans and student loans -- Fitch analysts warned that problems in the labor market could seep back into housing, "further exacerbating and extending the existing economic downturn and weakening collateral performance across sectors." Unemployment will approach 8.5 percent by 2010, and that's likely to push national home prices down more than the previously forecast 30 percent peak-to-trough decline, Fitch analysts said. It will also take longer...

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