Bush Aide: Housing Slump Will Hamper U.S. Economy

The U.S. housing market slump was a heavy burden for the economy in the late summer, a top adviser to President Bush said on Monday.

The quickly cooling market will affect a very significant chunk of the economy’s growth in the third quarter, the adviser, Edward P. Lazear, chairman of the White House’s Council of Economic Advisers, said in an interview with the New York Times.

“The housing slump is going to hit us,” he said.

The U.S. economy is expected to be among the issues considered by voters when they go to the polls November 7.

Lazear would not predict how much the economy grew in the quarter from July through September. Many economists are forecasting that the gross domestic product grew at a rate of 2.1 percent in the period, which would be the weakest performance since the last quarter of last year. At that time, the economy was still reeling from the Gulf Coast hurricanes.

The economy grew at a pace of 2.6 percent in the second quarter, reflecting the housing slowdown, high energy prices and the Federal Reserve’s two-year campaign of raising interest rates — which, in turn, impacts the mortgage rates consumers pay and the demand for housing that follows.

Last week, the cost of mortgages more or less held steady amid conflicting reports from numerous economic indicators and a general climate of uncertainty.

The second-quarter showing was less than half the 5.6 percent pace logged in the first three months of this year — the best growth spurt in two and a half years. But reports of an overall price decline in the housing sector and persistent concerns over inflation have pundits worried.