Volume 10, Issue 5 - May/June 2009

Industry Indices 

Forecasters Predict Bottom is Near
A recent semi-annual construction forecast held in Washington, D.C., by the National Association of Homebuilders (NAHB) held a much different theme than the group’s previous forecast, held in October of 2008. Many economists who spoke predicted not only that the bottom of the housing market is near but many even shared an optimism not seen recently in such forums.

David Crowe, chief economist for the NAHB, shared several reasons he believes it’s nearing an end.

One of these is the work of the Federal government to revive the market.

“The Fed has done virtually everything they can think of, and probably still have some tricks up their sleeves,” he said. “They continue to surprise us.”

He also noted that the government has been working especially hard to slow down foreclosures.

The fact that some material prices are down also is a positive, he said.

“When there is an opportunity to build, there’s at least downward pressure in the underlying material prices,” Crowe said.

Maury Harris, an economist with UBS Securities LLC, shared this optimism.

“We’ve seen the downturn in house prices, we’ve seen the recession, but the good news is, I’m finally turning into an optimist,” he said. “I think the second half of the year we’re going to see a turnaround … We think the worst is behind us.”

Regarding the credit crunch, Harris said he thinks that lending standards will soon ease—at least in the mortgage arena.

“If price is coming down and rates are coming down, there are more people who are going to be able to qualify [for a home loan],” Harris said.

James Glassman, an economist for JP Morgan Chase, also applauded the government’s efforts to revive the economy.

“We all have complaints about what’s going on [in Washington] …” he said, “but the truth is, if you look at the actions we’re taking, [I] thank God.”

He also holds hope for the near future.

One area he pointed to is the oil crisis—and the fact that oil prices are still somewhat low compared to their Summer 2007-Summer 2008 peak.

“If we’d known oil prices were going to explode the way they did, we pretty much would have told you that the surge in oil prices would slow us down by 1 or 2 percent,” Glassman said. “The point of this picture is to remind you that this oil phenomenon was once a headwind, but now it’s a tailwind.”

Glassman also addressed the credit market.

“The second reason to be optimistic is that if credit shut down production last fall, the opening of credit and the normalization of credit flows is going to release some pent-up demand,” he said. 


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