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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: lurqer who wrote (20558)	6/17/2003 2:08:58 PM
From: Jim Willie CB	Respond to of 89467

I see econ recession right when all expect a recovery / jw

To: lurqer who wrote (20558)	6/17/2003 2:53:33 PM
From: stockman_scott	Read Replies (2) \| Respond to of 89467

Boom In Housing Could Last A Decade As New Households Drive Up Demand By Jed Graham Investor's Business Daily Tuesday June 17, 10:06 am ET biz.yahoo.com The housing market may be on fire, but it isn't on the verge of a meltdown, Harvard University's Joint Center for Housing Studies reported Tuesday. The annual State of the Nation's Housing report calls "unlikely" the prospect of widespread declines in home prices, noting prices in most areas have grown in line with income growth. And it paints a favorable outlook for housing demand throughout the decade. But the report notes two risks to the housing market that could cause problems if the current economic recovery falters. One worry is the growing number of home loans to borrowers with weak credit histories - loans that would have been denied a decade ago. Another is the jump in the number of homeowners spending more than half their incomes on housing, which could leave them vulnerable if they lose a job. Separately, the National Association of Home Builders said Monday its Housing Market Index, a monthly gauge of builder confidence, jumped 5 points in June to 62, the highest since February. "There is no question that today's interest-rate picture is the best it has been in many decades, and house values have continued to move up at a solid pace," said David Seiders, NAHB's chief economist. "These factors have stimulated both home buying and mortgage refinancing by America's homeowners, providing double-barreled support to the nation's economy." NAHB expects new home sales this year to top last year's record. The Harvard report highlighted the importance of housing wealth in sustaining consumer demand in the current jobless recovery. "Homeowners converted an estimated $180.2 billion of their (home) equity into cash during 2001-02, investing as much as a third of that amount on remodeling," the report said. During that two-year period, home equity climbed $405 billion, partly offsetting a $1.4 trillion drop in stock portfolios. Since more people own homes than stock, home equity gains have a bigger impact on spending, according to Federal Reserve estimates. "Inflation-adjusted home prices rose faster in 2001 than at any time since 1978, and nearly as fast again in 2002," the report said. Despite concerns about the economy's reliance on housing wealth, the Harvard report said fears of a housing bubble "seem overblown." The cities such as New York, Boston and Miami where home prices have risen most relative to incomes have a scarcity of developable land, the report says. And experts agree. "Overpricing seems to be primarily confined to very supply-constrained areas," said John Burns, founder of John Burns Real Estate Consulting in Irvine, Calif. Any decline would be modest, the Harvard report said. "When housing prices deflate, they do so slowly. Many owners choose to stay put when prices soften. This reduces the number of homes on the market and helps bring supply and demand back in balance." For now, "(Housing) production appears to be running in line with long-term demand." The Harvard report expects household growth, the primary driver of housing demand, to top 12 million this decade. Immigrants should account for one-fourth of the growth, and minorities two-thirds. The report suggests the current low-interest rate economy is providing a Goldilockslike backdrop for housing: not too hot, not too cold. But a move in either direction poses challenges. A rise in interest rates would make homes less affordable and create higher hurdles for first-time buyers, the report says. "Almost all homeowners have a mortgage rate less than 7%, so if rates rise substantially, existing homeowners will be more likely to stay in their homes," said Burns. A weakening economy with more job losses could lift default rates. "If the economy slides back into recession, the downward pressure on housing markets would compound the lingering effects of the 2001 downturn," the report said.