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Though there is currently downward momentum" in the housing market right now, the downswing is poised to move back up again in 2008, economists at a recent National Association of Home Builders forecast conference said.
The economists gave these reasons:
"Home sales should bottom out by the end of the first quarter 2008, and I have starts up in the third quarter of next year, assuming the inventory overhang stabilizes," said NAHB Chief Economist David Seiders.
Residential fixed investment should turn positive in the fourth quarter 2008, he said.
Still, even as home sales move upward in the first half of next year, they will remain on par with levels recorded in the late 1990s. Housing starts are expected to be down nearly 12% next year, according to NAHB projections. Single-family starts are expected to be down 50% from their peak in the first quarter 2006.
"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 per year," Seiders said.
UBS Investment Bank managing director and chief economist Maury Harris forecasts that housing will bottom out in the first half of 2008 and move back up in the second half of the year. He says the housing recovery will be "hampered" by foreclosures on subprime and Alt-A loans this year and next.
"The foreclosures aggravate the inventory situation and weigh on the market more than in past cycles," he said.
Still, at least one economist at the conference says the economy will absorb the shock from stress in the subprime mortgage arena, which makes up 13.5% of the market.
Source: NAHB.org news release