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Subprime Woes to Further Crunch Economy

BEVERLY HILLS, CA-With serious exposure to subprime loans ready to reset next year, California's economy will take a hit that will continue at least another 18 months, say Milken experts.

By Daniel D. Williams | Updated on October 29, 2007

BEVERLY HILLS, CA-While It’s a poorly-kept secret that single-family housing problems are hamstringing the economy. But the end is not yet in sight—not by a long shot, according to experts at yesterday’s Milken Institute State of the State Conference. The housing slump “will stay tough for quite some time,” said Jeffrey Mezger, president and CEO of KB Home.

Conservative estimates from the panelists hold housing’s recovery in check for at least another 18 months. In addition to Mezger, speakers included: Countrywide Financial Corp. chairman and CEO Angelo Mozilo; State of California Treasurer Bill Lockyer; Milken Institute director, regional economics, Ross DeVol; and Lewis Feldman, partner, Goodwin Procter LLP.

Mezger pointed to California’s “terrible affordability crisis” as a chief reason for the downturn’s resiliency. “Affordability was in crisis before the subprime problems hit. There is at least a year’s supply of housing on the market, and it won’t clear until prices are lowered.”

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