The Seiders' Report: A Housing Overview by the NAHB's Chief Economist

Highlights

• Economic growth improved in the second quarter but serious weakness is bound to resurface later this year.  We now expect real GDP growth to slip back into the negative zone in the final quarter of this year and the first quarter of 2009, bringing an official recession “call” back onto the NBER’s radar screen.  

• The labor market is weakening systematically, with payroll employment on a downward trend and the unemployment rate on the rise, and alternative measures of labor underutilization look even more serious.  Labor market conditions are bound to deteriorate further over the balance of this year and the early part of 2009, putting downward pressure on unit labor costs in the process.

• The Federal Reserve held monetary policy steady at the August 5 FOMC meeting, and the FOMC statement suggested that the Fed now views downside risks to growth and upside risks to inflation to be about in balance.  We expect the Fed to maintain the current “accommodative” monetary policy stance until the second quarter of next year.

• Credit market conditions have deteriorated considerably, reflected in widening quality spreads in corporate bond and mortgage securities markets as well as in tightening lending standards in the banking system.  A recent Federal Reserve survey documents a substantial cumulative tightening of bank lending standards for home mortgages and for loans to builders/developers.

• Available data show that the housing downswing still was “ongoing” at midyear, with a serious supply-demand imbalance still in force.  Furthermore, NAHB’s surveys of builders clearly show that the demand for new single-family homes continued to deteriorate in July and possibly also in August, held down by a rising tide of foreclosure sales at cut-rate prices.

• The Housing and Economic Recovery Act of 2008, signed into law by the President on July 30, should help stabilize housing and mortgage markets in the near term and provide longer-term support as well.  A temporary tax credit for first-time home buyers and a foreclosure prevention program for homeowners will help address the daunting supply-demand imbalance and help to support home prices in the process.

• NAHB’s housing forecast shows stabilization of home sales before the end of this year, aided by the new housing bill.  We expect housing starts to hit bottom early next year, and residential fixed investment should start up in the second quarter of 2009.  We’re projecting a solid housing expansion in 2010 as the production of new housing units climbs back up toward sustainable trend levels.

Full Report

Please note: This information is available only to HousingEconomics.com subscribers. Download free Samples.

Instant Online Access Now!

< Previous Article | Next Article >

[ return to top ]