U.S. Now in 'Mild' Recession, NAHB Economist Says
The deepening slump in the nation's housing markets has seriously eroded consumer sentiment and pushed the economy into a mild recession, according to the chief economist for the National Association of Home Builders. "The worse-than-anticipated housing downturn, combined with systematic weakening of the labor market and rapidly rising energy and food prices, has taken a heavy toll on American consumers," said NAHB's David Seiders, in a press statement released Tuesday morning. "It's now clear that we have entered what we anticipate will be a mild recession, running through the first half of this year, and there are substantial downside risks to this economic scenario." The NAHB economist argued -- as he has for well over two months -- that Congress needs to take "immediate steps" to guard against a more severe downturn. In particular, Seiders said, modernization of the Federal Housing Administration and reform of Fannie and Freddie should be front and center for policymakers. "Stopping the downward trend in housing prices is key to bolstering consumer confidence as well as mortgage credit quality, and a temporary home buyer tax credit is the best way to do that," he said. That may be easiers said than done, according to industry sources that spoke with Housing Wire, many of whom think that prices in many key markets yet have further to fall -- and, indeed, some say that prices must continue to fall. "Prices need to keep dropping," said one source at a major mortgage insurer, who asked not to be named. "We'll never right this ship we call housing if we waste our time and tax dollars trying to keep housing prices out of whack relative to income." Given the ongoing erosion in housing finance markets and buyer demand, Seiders said he had adjusted the NAHB's official housing forecast to indicate continuing downward movement in housing starts through the end of 2008, bringing the decline for the year to 30 percent. A month ago, Seiders expected housing starts to bottom out in the third quarter, with a 27 percent decline for 2008. "This change in our forecast indicates that, barring immediate action by Congress to stimulate housing and the economy, the housing sector will continue to be a serious drag on economic growth until the beginning of 2009," he said. For more information, visit http://www.nahb.com.