The U.S. housing industry is in for a sustained decline, though signs of a cool-down have been slower to emerge than previously expected, according to the quarterly UCLA Anderson Forecast released Wednesday, USA Today reported.
The widely respected forecasting center at UCLA said rising interest rates, slowing population growth, overbuilding and the fact that prices had reached bubble-like heights in some hot areas will drive the decline, according to reports.
The report said that housing, which had been a big driver of growth, is contributing little to the economic expansion at present, USA Today reported.
The economists said that though a sharper slowdown in housing will hurt the broader economy, it is not expected to push it into recession, according to reports.
“The remaining questions are how hard the fall will be and when it will begin,” Michael Bazdarich, senior economist at the UCLA Anderson Forecast, said in the report, according to USA Today. “The recent anecdotal evidence suggests the decline may be beginning. We’ll soon see for sure,” he said.
Previously, UCLA Anderson Forecast economists had predicted that housing construction would begin to slow in mid-2005, a projection it later pushed back to early 2006.
There are signs that the market has begun to cool, including a decline in existing home sales and softening prices for homebuilder stocks. But Bazdarich said it was “still too early to call the turn,” according to reports.
Along those lines, the Mortgage Bankers Association said Wednesday that mortgage applications rose in the past week. The demand for purchase loans rose for the third time in four weeks, while mortgage refinance demand firmed for the first time in nearly two months.
Edward Leamer, director of the UCLA Anderson Forecast, noted that eight of the past 10 economic recessions were started by housing-market slowdowns, reports said. But, Leamer observed, loss of spending on housing alone would not be enough to trigger a recession.
And while Leamer estimated the bursting of the housing bubble could cause the loss of 500,000 construction jobs and 300,000 financial services positions over two to three years, he does not expect a large decline in manufacturing and notes that steady job gains are expected in other industries, reports said.
“Bottom line: A jobless recovery is going to be followed by a jobful non-recession,” Leamer wrote in his U.S. forecast, according to reports.
In a separate forecast for California, the economists said a recession was not out of the question if the housing market slowed more than expected, according to media reports. It also said that while home-price appreciation was slowing in parts of California, it was a long way from flattening.
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