The chief economist for the National Association of Home Builders, in his latest annual forecast, said he expects total housing starts to fall 25 percent this year, with single-family starts plummeting 31 percent.
“We still expect starts to begin edging up in the final quarter of this year, but we’ve also trimmed the outlook for 2009,” Seiders stated in a forecast report released this week.
Seiders acknowledged that there is “a nearly even chance” that the economy will slip “into the red zone during the first half of the year.” He anticipates “further deterioration of labor market conditions in February, and the unemployment rate almost certainly will be moving up in coming months.”
He also expects gross domestic product growth of less than 1 percent in the first half of 2008, “and a mild recession certainly is possible during that period,” the report states.
“Our baseline housing forecast shows substantial reductions in home sales, housing starts and residential fixed investment for 2008 as a whole, but we’re looking for stabilization of all three measures (in that order) by the end of the year, and 2009 is shown as a decent recovery year.”
A record volume of vacant homes for sale “inevitably will put persistent downward pressure on home prices, further sapping the quality of outstanding mortgage credit and making it even more difficult to refinance or restructure adjustable-rate mortgages facing payment resets,” the report states.
Financial market turmoil is continuing, Seiders noted, as “the stock market is being battered and the markets for longer-term credit remain under considerable strain.
“The freezing-up of private securities markets, both here and abroad, has shifted credit demands to government-related securities markets and to depository institutions — resulting in higher loan volume and pressures on capital positions at the depositories.
“The banking system will have to take up a good bit of the slack in the credit creation process.” That has led the banking system to tighten lending standards, which has “afflicted all components of the conventional home mortgage market,” he stated in the report.
His forecast follows a series of reports that show historically deep declines in a range of market metrics.
The U.S. Census Bureau and Housing and Urban Development Department on Wednesday released new-home sales statistics, which reveal that the slowing in housing sales inflated the supply of for-sale housing in January to its highest level since 1981.
Sales of new single-family homes fell to the lowest adjusted annual rate in about 13 years in January. And new homes spent a median 6.7 months on the market in January, which was the lengthiest time on market since May 1992, when the agencies reported a median 7.1 months on market.
Meanwhile, the National Association of Realtors has reported that the median price of single-family resale homes dropped 5.1 percent in January compared to the same month last year, with total sales for all resale home types dropping 23.4 percent.
U.S. foreclosure activity in January, as measured by the volume of total foreclosure filings, rose about 57 percent compared to January 2007, real estate data company RealtyTrac reported. And NAHB reported earlier this month that median-priced homes in about half of the 220 U.S. metro areas included in a housing affordability index study were unaffordable to median-income households during fourth-quarter 2007.
The U.S. home-ownership rate fell during the fourth quarter to 67.7 percent, which continues a slide that started in third-quarter 2004, and the wave of mortgage foreclosures that is a contributor to that decline “are sure to extend through 2008 and into 2009,” Seiders wrote in the report.
Rate cuts by the Federal Reserve should continue in upcoming meetings in March and April, according to the report, “and the Fed could deliver even more monetary stimulus if conditions warrant.”
He states that the Economic Stimulus Act of 2008, signed by President Bush on Feb. 13, does offer some glimmers of hope, as its temporary increases in loan-size limits “are bound to help the housing market in high-priced areas (like California) to some degree,” though “it remains to be seen how much additional home buying will be stimulated over the balance of the year.”
The report adds, “Expiration of the higher limits at year-end figures to be a serious problem in the likely event that the private secondary market for jumbo loans still is not functioning properly by then.”
And Seiders suggests that tax incentives for home buying could offer a boost to the housing market, if “coupled with policy measures that enhance the availability of mortgage credit,” via federal and state housing finance agencies.