Economists Suggest Housing Outlook Remains Weak

By Pete Frank
October 1, 2007
Washington, D.C.—We are “almost certainly looking at another down year,” David Seiders, chief economist of the National Association of Home Builders, announced at the 75th National Construction Forecast. Citing mortgage and credit problems; home sales, housing starts and permits all being down; and weak demand coupled with heavy inventory, he noted, “The question is will we be seeing the bottom in 2008?”

Most panelists foresee the end of the down market coming before the end of 2008, but many admitted their surprise with how things played out over the past six months.

“I’ve been surprised by the downturn, not that there was a downturn, but this is well beyond anything I expected,” said Mark Zandi, chief economist of Moody’s Inc. His forecast predicts the next couple of months seeing the bottom in regards to sales, with the middle of next year seeing housing starts bottom out. “Prices will decline throughout 2008, bottoming at the end of the year, possibly the first quarter of `09,” he noted.

Offering a regional outlook, Bernie Markstein, NAHB’s director of forecasting and staff vice president, attempted to bring some optimism to the conference. “We can’t deny the negative, but at the same time let’s keep this in perspective—there is some positive in here.” While there are problems, he continued, to some extent they’re localized in the places we should expect. Pointing at California, Southern Florida, Washington, D.C. and other areas where the markets are performing the worst, Markstein said these were areas with extreme activity during “the boom,” adding that they will return to normal market levels, as they should.

When asked about the possibility of recession, a panel of economists predicted a 30 to 40 percent chance, explaining that recessions have happened in the past under these circumstances, but unusual attributes, like “normal” levels of consumer spending, provide reassurance that a recession won’t happen.

“I know the market is weak, but I think most of the discussion in the media and by analysts is exaggerated and sensationalized,” noted Michael Moran, chief economist of Daiwa Securities America Inc. “The outlook is not good, but it’s not desperate either. Most of the exaggeration begins with the subprime market.” He went on to explain that subprime mortgages make up only 13.5 percent of all mortgages, and 75 percent of mortgages are the typical, prime market mortgages. He also cited that while debt is up, net worth is up as well, reinforcing the idea that a recession is not likely.

NAHB’s next construction forecast conference is scheduled for April 28, 2008. Details are available at