Saturday, October 21, 2006

Real Estate Journal - "How Will the Housing Slump Affect the U.S. Economy?" (10-19-06)

"Celia Chen writes: Housing markets are sliding fast. Home sales are well off of last summer's peak, house prices are down on a year-ago basis, inventories are mounting, and leading indicators of housing activity suggest that the market will weaken further before it turns up. Indeed, by at least one indicator, conditions have sunk to the depths hit during the last housing bust in the early 1990s."

"Housing markets clearly need to correct to offset some of the excesses that have built up during the exceptionally strong boom of the last several years. The bad news is that the correction will take about one half of one percentage point off of GDP growth this year and another three quarters of a percentage point off of growth next year, as the slowing in housing hurts employment, construction activity and reverses the wealth effect."


"The good news is that the market is correcting, not crashing -- and other economic drivers are strong enough to withstand the hit."


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