Friday, September 08, 2006

Will A Pause Save Housing?

From Bloomberg:

Housing Market's Drag on U.S. Economy May Let Fed Stay on Hold

The faltering U.S. housing market will be more of a drag on growth than economists expected a month ago, allowing Federal Reserve policy makers to hold interest rates steady through the first half of next year, according to a monthly survey by Bloomberg News.

Gross domestic product, the sum of all goods and services produced in the country, will expand at an average annual rate of 2.8 percent this quarter and slow to 2.6 percent in the final three months of 2006, according to the median forecast of 81 economists surveyed Sept. 1 through Sept. 7. The fourth quarter estimate is a 10th of a percentage point lower than the prior survey. Growth averaged 4.3 percent in the first half.

Flagging home sales resulting from higher mortgage rates will remove a source of cash that helped drive consumer spending and economic growth during the five-year housing boom, economists said. The Fed's monthly regional survey showed consumer spending last month rose ``slowly'' and growth faded in some areas, strengthening the case for holding rates steady.

The housing market is declining ``a little more quickly than we had expected at the beginning of the year,'' said Scott Anderson, an economist at Wells Fargo & Co. in Minneapolis. ``It's not signaling a recession, but we do see a growth slowdown ahead.''
...
The housing market ``went from overheated to back-to-normal to under-heated,'' Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., said yesterday. Hovnanian, New Jersey's largest homebuilder, said fiscal third-quarter profit fell 34 percent.

The slowdown in housing will leave consumers with less cash from refinancing and home-price appreciation, which lifted spending during the housing boom that ended last year. Higher fuel costs are also pinching consumers.

4 Comments:

Blogger Metroplexual said...

I almost feel the need to say I told you so to these so called expert bozos. Oops, I did say it.

BTW, AnotherF'dborrower has a new post.

9/08/2006 05:36:00 AM  
Anonymous gary said...

"The housing market ``went from overheated to back-to-normal to under-heated,'' Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., said yesterday."

Duh!

9/08/2006 07:51:00 AM  
Blogger RentinginNJ said...

Will A Pause Save Housing?

No. In fact a pause may actually hurt the housing market. Rising interest rates were the only element maintaining any sense of urgency among buyers. Earlier this year, sales were still relatively strong. Much of this could be attributed to a “rising rates will price you out forever” fear among some buyers.

Over the past 2 months, rates have more or less stabilized, but the market has really started to tank. Why? Where is the urgency to “get in now”? Rates appear stable and housing prices are falling. Why would anyone want to buy now?

9/08/2006 07:58:00 AM  
Anonymous Anonymous said...

I really don't see how the FED can pause if inflation is too high for their comfort level. If the fed never raised rates a loaf of breat would be 10 smackers.

9/08/2006 12:17:00 PM  

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