John Paulson says weakness in the housing market is posing a threat to the U.S. economic recovery.
“In my eyes, the major risk for the American recovery is the stagnation of the residential real-estate market,” Paulson told French newspaper Les Echos, according to Reuters. “It will be difficult to have a rebound in real-estate prices this year.” (For French speakers, here’s a link to the original article, in which Paulson also discusses the impact of Wall Street reform on the recovery.)
Paulson, one of the few to call — and profit from — the 2007-09 housing bust, says banks will be unwilling to lend while there is uncertainty over their right to foreclose, which means home prices aren’t likely to rise in 2011. He says 1 million to 1.2 million new homes need to be built per year for a solid recovery; only 300,000 are now being built, he says. Paulson also says inflation remains a risk because of the Federal Reserve’s policies.