|
Fed Chief Sees Uncertainty in Near-Term Housing Outlook
 Mortgage interest rates remained low last week as housing analysts pondered mixed-signals about the direction of the industry and Federal Reserve Board Chairman Ben S. Bernanke warned the Joint Economic Committee of the Congress of the possibility that problems with subprime loans could make the current market correction worse than expected.
“The near-term prospects for the housing market remain uncertain,” Bernanke testified. “Sales of new and existing homes were about flat, on balance, during the second half of the year. So far this year, sales of existing homes have held up, as have other indicators of demand such as mortgage applications for home purchase, and mortgage rates remain relatively low.”
However, he noted that new-home sales have declined and the slowdown in production has still not worked down the unsold inventory to levels that will support a resurgence in activity.
Existing home sales were up in February to a 6.69 million annual pace, their highest level since last April, but new-home sales faltered during the month, declining to a seasonally adjusted yearly rate of 848,000, which was the lowest point since June 2000.
“Even if the demand for housing falls no further, weakness in residential construction is likely to remain a drag on economic growth for a time as home builders try to reduce their inventories of unsold homes to more normal levels,” Bernanke said.
Turning to the sharply rising delinquencies in recent months on variable-interest-rate loans to subprime borrowers, Bernanke said that the implications are not entirely clear.
“The ongoing tightening of lending standards, although an appropriate market response, will reduce somewhat the effective demand for housing, and foreclosed properties will add to the inventories of unsold homes,” he said.
“At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency. We will continue to monitor this situation closely,” Bernanke said.
He also told Congress that it is likely that the U.S. economy will continue to expand at a moderate rate over coming quarters. “As the inventory of unsold new homes is worked off, the drag from residential investment should wane.”
In the results of its Primary Mortgage Market Survey for the week ending on Thursday, March 29, Freddie Mac reported that the 30-year fixed-rate mortgage had remained unchanged from the prior week, averaging 6.16%, which was down from 6.35% for the same week one year earlier.
One-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.88%, down from 5.91% during the previous week but up from 5.51% a year earlier.
“Despite concerns about possible spillovers from the troubles in the subprime market, rates on 30-year fixed-rate mortgages remained stable,” said Frank Nothaft, chief economist for Freddie Mac. “The ample liquidity provided by Freddie Mac in the conventional conforming mortgage market has helped keep rates down, supporting affordability and aiding in the ultimate recovery of the housing market.”
Meanwhile, NAHB Chief Economist David Seiders said that “the evolving mess in mortgage markets threatens home sales and housing production” for the balance of this year and possibly into 2008.
“NAHB’s forecasts for both home sales and housing production have been trimmed recently, and we now expect single-family housing starts in 2007 to be the lowest since 1997,” Seiders said.
“We’re still looking for some recovery in 2008, although our current forecast for housing starts is well below our estimate of the sustainable trend level of production. In these terms, the major ‘correction’ process that began in the fall of 2005 will extend at least through 2008.”
For a more in-depth look at the latest developments in the housing market, click here to read Seiders’ “Eye on the Economy” reprinted in this issue of NBN.
How Deep
 Is the Housing Correction? Attend Construction Forecast Conference
Will housing demand outweigh affordability hurdles, inventory overhangs and the retreat of investors? Where are home prices headed?
Get the answers to these and other questions at the Construction Forecast Conference — Spring 2007 on April 26 in Washington, D.C.
Panels of nationally recognized experts will discuss economic trends, government policies, developments in the housing industry and the results from NAHB's recent surveys at the day-long conference.
For more information and to register, click here.
Can't Attend in Person? Webcast of Conference Also Available
The conference is also available via Webcast. For Webcast information, visit www.nahb.org/cfcwebcast.
 Want to Know Your State’s Starts Forecast for 2008?
Find out in HousingEconomic.com’s State Starts Forecast (sample). The starts forecast includes downloadable Excel tables of total, single-family and multifamily starts by region and state.
To learn more, visit www.housingeconomics.com.
 NAHB Kit Gives Builders Back-to-Basics Tips in Cooling Market
With the current cooling of the nation’s housing market expected to persist into the middle of the year, NAHB has developed a comprehensive online toolkit geared to providing association members with information that will help them prosper in today’s changing business environment.
|
