General Housing Market to Start Recovery in early '08

Home sales should bottom out by the end of the first quarter of this coming year, according to a recent study and report from the National Association of Home Builders. Despite current market sluggishness, the housing market will start to turn around next year for a number of reasons: the overall economy and job growth will continue to move ahead at a decent pace, core inflation is under control, the credit crunch in mortgage markets is showing signs of easing, and the supply-demand equation will be better balanced as builders begin to whittle down their excess inventories. That's the prediction of David Seiders, chief economist for NAHB. "With the housing sector facing a large backlog of unsold inventory, new construction starts and permits won't begin to move forward until sales firm up. Home sales should bottom out by the end of the first quarter of next year, and housing starts will be up in the third quarter, assuming the inventory overhang stabilizes," he said. NAHB's short-term forecast is based on several assumptions: skillful management of monetary policy by the Federal Reserve, maintenance of solid growth in personal income and employment, a manageable wave of home mortgage foreclosures and better performance of mortgage markets going forward. The report observed that the long-term potential for housing activity is very good. "By the end of 2009, we may be at a pace of 1.5 million units of new housing production (including manufactured homes). Once we are out of the woods, we should see good growth in front of us - maybe 2 million units per year."