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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: nextrade! who wrote (6056)	10/16/2002 4:13:06 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 306849

quote.bloomberg.com 10/16 13:35 U.S. Economy: Housing Won't Be an Engine for Growth Next Year By Siobhan Hughes and Vince Golle Washington, Oct. 16 (Bloomberg) -- U.S. applications to buy homes fell last week to the lowest since April and home builders say residential construction won't provide much of a boost for the economy's recovery next year. ``Don't look to housing to be a growth engine,'' said David Seiders, chief economist for the National Association of Home Builders. ``We're moving along pretty much sideways.'' A Mortgage Bankers Association of America index of purchase applications declined 3 percent last week, the third straight decrease, to the lowest level in six months. And figures from the National Association of Home Builders for October showed declining expectations for sales six months from now. Housing construction, which accounts for about 4.5 percent of gross domestic product, is already contributing less to the economy. Consumer confidence has fallen to a 10-month low and the economy has lost 1.6 million jobs since the recession started last year. And with homeownership close to an all-time high, there's little pent-up demand. That may limit the positive effects of the lowest mortgage rates since the Vietnam War. ``We're going to need to have growth out of other parts of the economy, particularly the corporate sector and capital investment,'' Seiders said. Residential building added 0.1 percentage point to GDP growth in during the second quarter, compared with 0.6 percentage point in the first three months of the year. Government statistics for July and August suggest housing was a drag on third-quarter growth. Value of Construction The value of single family construction, adjusted for inflation, is likely to total $196.4 billion in 2003, little changed from the $196.6 billion expected for this year, Seiders said in his annual forecast released today. Starts of new houses, apartments and condominiums will probably fall to 1.6 million next year from about 1.66 million this year, Seiders said. The expected number of new construction starts this year would be the most since 1986. The Commerce Department will probably report tomorrow that starts rose in September to an annual rate of 1.64 million from about 1.61 million in August, according to the median of 59 forecasts in a Bloomberg News survey. Seiders said his forecast is based on an assumption that interest rates in mid-2003 will be about where they are now. The Federal Reserve has held the benchmark overnight bank lending rate at a 41-year low of 1.75 percent since December. For housing to add to growth, it has to keep rising quarter after quarter. One limit to that is that U.S. home ownership surged in recent years. The ownership rate totaled 67.6 percent of all households in mid-2002, Commerce Department figures showed, close to the record 68.1 percent in the third quarter of 2001. Best Probably Over While the best for housing is probably over, builders say they will stay busy meeting the backlog of demand that accumulated over the last several years of record sales. Orders at builders including Standard Pacific Corp. and Hovnanian Enterprises Inc. were 18 percent higher through the first nine months of this year than they were at the same time in 2001. That suggests that slowing sales won't remove the pillar of support for the economy that housing provides. The home builders association estimates that every 1,000 single-family houses under construction generate 2,448 full-time jobs, $79.4 million in wages, and $42.5 million in combined federal, state and local tax receipts and fees. It matters that housing be sustained because a manufacturing recovery has stalled, companies are firing workers, and businesses, laden with excess capacity, are reluctant to purchase equipment or open new factories. Without the strength of the housing market, the recovery may falter, economists said. Low Mortgage Rates For almost two years, housing has been a boon for the economy, limiting the depth of last year's recession and providing a lift for the recovery. The average rate on a 30-year mortgage dropped last week to 5.98 percent, the lowest since Freddie Mac began keeping records in 1971. That's also the lowest since 1965 when the rate was 5.83 percent, according to figures from the Federal Housing Finance Board, which has kept records longer. Orders at five homebuilders, including Hovnanian and Standard Pacific, have increased this year. It typically takes up to six months to build a house from the time one is ordered. D.R. Horton Inc., the No. 2 U.S. homebuilder by stock market value, said orders in the three months that ended Sept. 30 rose 66 percent from the same period last year. Builder shares are falling. The Standard & Poor's Supercomposite Hombuilding Index has dropped 7 percent this year and 25 percent from it's May peak. The index dropped 3.3 percent, while the broader S&P 500 stock index fell 2.3 percent. The builders overall housing market index fell to 62 this month from 63 in September, which was the highest since November 2000. In addition to lower expectations for sales six months from now, the index also showed a decline in buyer traffic for October.