US housing recovery seen for early '09 - maybe

24 April 2008 17:14  [Source: ICIS news]

WASHINGTON (ICIS news)--The US housing market crisis is not over but should bottom out in the second half this year and begin a recovery by year end that will continue through 2009 and beyond, a top sector economist said on Thursday.

 

However, David Seiders, chief economist at the National Association of Home Builders (NAHB), cautioned that if the housing sector does not begin a recovery at year end, the US economy could be in for a prolonged recession.

 

New home construction is a key downstream consuming sector for US chemicals manufacturing.

 

Speaking at the association’s semi-annual housing forecast conference, Seiders said that he now believes the US is in a mild recession, an opinion he did not hold earlier this month.

 

“It is fair to say that the US economy is deteriorating,” Seiders said, “and it’s not over.”

 

He said that as recently as his last six-month outlook in October last year, “we expected the housing sector would continue to lose ground through the end of 2007 and into 2008, but the decline has been sharper than we had anticipated”.

 

“The situation definitely has darkened,” he added, noting that as of February this year construction of new, single-family homes has fallen 63% nationwide compared with September 2005. 

 

The fourth quarter of 2005 is when the US housing slide began after three years of what Seiders termed “unsustainable growth” based on low interest rates and unsound lending policies in the now infamous subprime mortgage market.

 

Seiders said that he expects that housing starts - a term meaning that a contractor is actually beginning to build a new residential unit - will continue to decline to an annualised and seasonally adjusted range of 900,000 units in the third and fourth quarters this year, followed by an uptick to 950,000 housing starts in first quarter 2009 and 1m units in the second quarter.

 

He expects new home construction will have increased to 1.17m units by the fourth quarter next year (on an annualised and seasonally adjusted basis). 

 

However, even that improved level of new home construction would be nearly 1m units shy of the peak home building level of more than 2m housing starts in 2005.

 

Seiders cautioned that if the US housing sector does not begin a recovery late this year and early next, the country could be in for a prolonged recession.

 

He noted that the $150bn (€95bn) federal stimulus package authorised by Congress in January this year will have worked its way through the US economy by the end of this year and that a housing upturn early next year will be needed to drive an overall economic recovery.

 

“It is critical that the housing sector recover in early 2009, or we will be facing a double-dip recession,” Seiders said.

 

($1 = €.63)

By: Joe Kamalick
+1 713 525 2653

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