Released: July 24, 2008

Consumers fall further behind financially

Source: John Waggoner, USA Today

Americans’ household finances are bad and getting worse, and that spells trouble for the economy for the rest of the decade, according to a study by Moody’s economy.com.

Consumers are behind schedule in payments or have walked away from nearly $800 billion in household debt of all kinds — mortgages, credit cards, car loans, says Mark Zandi, chief economist for economy.com. “Household credit quality has arguably never been worse,” he says. Zandi is one of the nation’s chief analysts of regional economic trends. And Moody’s has a long history of credit analysis for municipalities and corporations.

Higher default rates are likely, Zandi says, because:

•The housing downturn. Projected declines in house prices, home sales and housing starts are all worse than the housing collapses of the 1980s and 1990s, Zandi says. He projects a nationwide home price decline of 26% from the peak in 2006.

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