David Seiders
David Seiders
housing run
It's been an unprecedented run for the housing sector.
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This has been an incredibly resilient U.S. economy, and housing has been a significant piece of that. The hurricanes provided a very significant risk, but we have seemed to have come through that. Despite the risks that might be present in the near future, I'll throw my cards into this economy simply because of how it's performed.
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I was obviously delighted to see this rebound. I think what it tells us is that the housing market is still fundamentally strong.
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There's other housing numbers showing some declines in April as well. My own survey of builders has shown them losing some momentum for the last couple of months, including May. I think there's some evidence accumulating that this supposedly highly interest-sensitive part of the economy is starting to give ground.
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I do have this sort of weakening of the housing sector, but I think it should be thought of as a systematic cooling down process toward sustainable levels of activity and not viewed as kind of a classic housing downswing that's part of an economic cycle leading to a recession.
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My overall assessment of the housing sector is that we probably fundamentally topped out in the third quarter of 2005 in terms of home sales and housing production.
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Our forecasts show 6 percent to 7 percent declines in home sales and single-family housing starts in 2006, followed by smaller declines in 2007.
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The key reason the market is losing momentum is a major decline in housing affordability measures as prices continue to move up aggressively in many, many markets around the country. There are reasons for the builders to be doing things to bolster demand, hold buyers in and limit cancellations, and I think that's what's going on out there.
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This is definitely a good sign that the housing market is stabilizing.
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All the fundamentals remain in place, and the overall housing market continues to exhibit ongoing strength. Favorable mortgage rates, as well as strong household income and job growth, continue to bolster housing demand.
decline february housing normal returned suggesting
It is a time-tested pattern. February has essentially returned to normal conditions, suggesting to me that we will see a substantial decline in housing starts.
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The housing market is seeking out a peak. While it is still too early to conclude that it has found one, there is growing evidence that the Fed has started to hit its mark and housing will begin losing some of its exuberance in the period ahead.
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Now what happens to the market depends on the interest rate structure. Long rates have been better than expected, but I think we can see them rising, moving into alignment with what's going on with the economy and with short-term rates.
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I am worried about the potential for a trailing down process that gains some momentum.