US builders cut '08 outlook, raise recession risk

20 December 2007 21:29  [Source: ICIS news]

WASHINGTON (ICIS news)--The US housing market will be weaker next year than previously expected and the risk of a general economic recession has increased fairly significantly, the top home builders association said on Thursday.

 

David Seiders, chief economist for the National Association of Home Builders (NAHB), told a press conference that the 2008 housing market “will be much weaker than I had expected earlier this year.”

 

“My outlook for 2008 has been cut dramatically,” Seiders said.

 

The housing industry is a key downstream consuming sector for chemicals and chemical-based products such as roofing and siding materials, paints and coatings, insulation, adhesives, fibres and plastics such as polyvinyl chloride (PVC) piping.

 

“I now see 2008 as a whole as another down year, while earlier I thought it would be a recovery year,” Seiders said. He said he expects new home construction next year to fall 20% to about 1.08m units compared with the already slow performance this year of some 1.35m new housing starts.

 

At the peak of the US housing boom in 2005 housing starts were at an annual rate of nearly 2.1m units.

 

Seiders said that because of the impact of the housing slump on the broader US economy, “the probability of a recession next year has increased fairly significantly.” He said he has raised his probability of a 2008 recession to 40% from his earlier estimate of 30%.

 

“We really are in a danger zone in the economy in terms of a possible recession,” Seiders said. “It will be touchy, but I think we will get through the year without a recession.”

 

He said he expects the downturn in the US home building sector will hit bottom in the second half of next year, to be followed by “pretty good expansion in 2009.”

 

“We’re counting on the Federal Reserve to step in and do what is necessary to stabilise the market,” Seiders said, referring to the US central bank and its recent cuts in interest rates. “We’re looking for another quarter-point cut in rates in the Fed’s January meeting,” he said.

By: Joe Kamalick
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