Wells: Housing Won’t Slow US Economy in 2007

Most U.S. households on average have never been better off in the wealth department, Wells Fargo’s senior economists said during the company’s annual economic forecast teleconference earlier this week. The economists also forecast U.S. economic growth in 2007 despite home price declines, Federal Reserve interest-rate increases and other economic factors. “The [stock] market’s recession fears are overblown and the U.S. economy will reveal incredible resilience in 2007,” said Dr. Scott Anderson, senior economist for Wells Fargo & Company. “The drivers that had been pulling down the U.S. consumer and economy in the first half of 2006 — such as rising energy prices and interest rates, sluggish wage growth, and a sharp drop in housing demand — began to recede or stabilize in the second half of 2006.” “The decline in home prices hasn’t yet resulted in a decrease in consumer confidence and spending, or a general decline of household wealth and it’s unlikely to occur next year,” said Anderson. “The housing slowdown has been offset by strong stock market wealth, so household wealth continues to grow.” Anderson said most of the damage in the housing market already has occurred and there are signs of recovery — mortgage purchases are up about 15 percent since the beginning of November. Existing home inventories have plateaued over the last four months, and the Wells Fargo National Association of Home Builders index has held above its September low for three consecutive months with builders reporting an improved sales outlook.