Housing slump predicted to last till '09

The U.S. housing slump will probably last until 2009 and home sales will take a "substantial hit" in the next several months as borrowers struggle to get mortgages, Moody's Investors Service said.

"The downturn is more severe and more protracted than we had expected," Joseph Snider, a senior credit officer at Moody's, said in an interview.

Home sales will be hurt by the lack of subprime and Alt-A mortgage lending and the difficulty borrowers with good credit are having obtaining mortgages, Moody's said in its report Monday. A glut of new and existing homes for sale is prompting potential buyers to wait for prices to fall before purchasing.

The Moody's forecast contrasts with the National Association of Home Builders, which expects housing to begin rebounding in mid-to-late 2008.

The worst housing market in 16 years has sent a Standard & Poor's measure of 16 U.S. homebuilders down 48 percent this year through Sept. 7. The index fell as much as 3.5 percent Monday.

Five of the largest U.S. homebuilders have reported combined losses of $1.85 billion and took charges of $2.9 billion to write down land values and abandon property options in their most recent quarters.

A recovery for housing could be hastened should the Federal Reserve take "frequent and concerted action," the report said. Moody's said it doesn't expect that kind of action to occur unless the economy heads into a recession.