The slowdown of the U.S. housing market will last through 2007 as inventories are pared enough to prompt a change in consumer psychology, the chief executive officer of the nation's biggest mortgage lender said on Tuesday.

Mortgage lending has slowed as rising inventories in the housing market led to a "hard landing" for the industry after a decade of strong growth, Countrywide Financial Corp. CEO Angelo Mozilo said at a Merrill Lynch & Co. conference in New York.

"We have another year of adjustment, or transition" in the industry until consumers believe home prices won't decline, Mozilo said. "Various events will make the change take place and one of them is" a decline in available homes, he said.

There is, of course, a reason for the gloominess and it can be summed up in one word: housing. The housing market has been severely battered. In October, housing prices were almost 10 percent lower on average than they were a year ago, the largest yearly decrease since 1970. The prices of new homes have taken the worst beating, plunging 33 percent just since April.
More people are having trouble meeting their mortgage payments. Foreclosures were up nationwide. The foreclosure rate was 43 percent higher than at this time last year. Building permits for new-home construction have tumbled about 30 percent. According to reports, a growing number of housing developments are completely empty. An economic report from a leading bank calls the housing problem "the biggest residential construction bust for fifty years."