NAHB to Congress: Housing Market will Rise Once More!
As potential buyers determine the most effective Florida mortgage loans to apply for in the current slow market, they should be comforted by a recent report submitted to Congress by the National Association of Home Builders (NAHB).
The organization told Republicans and Democrats alike that the current downswing in home sales and housing production - following the record housing boom of 2004-2005 - is expected to bottom out around the middle of next year and gradually move back up toward by late 2008.
The state of national and Florida home mortgages
Testifying before the Senate Economic Policy and Housing and Transportation Subcommittees, NAHB chief economist David Seiders said that while the housing downswing still has some unfortunate legs, “various economic and financial market fundamentals figure to be supportive of housing demand for the foreseeable future.”
These fundamentals include the following:
• Payroll employment is proceeding at a decent and sustainable pace.
• Household income growth is strengthening as the economic expansion proceeds.
• The interest rate structure is favorable, mortgage credit is readily available and monetary policy has stabilized following a long run of upward rate adjustments.
• Energy prices have receded from record highs earlier this year.
Of course, there also are considerable uncertainties. The impacts on consumer spending from lowered housing wealth/equity are difficult to gauge, as are from the effects of “payment shock” on home owners facing upward adjustments to monthly payments on “exotic” types of adjustable-rate Florida home mortgages.
Normalization of the housing market
It’s easy to make the mistake we’re currently undergoing a bust in the Florida housing market, but it’s really just a return to normal levels. Housing starts and sales of the past two years were at record levels. They were fueled to a great extent by investors and speculators seeking to make a quick profit and through the surge of unconventional Florida home loans, according to Seiders.
“In retrospect, it was the finance- and price-driven acceleration of buying for homeownership and for investment that drove housing market activity into unsustainable territory during the boom,” he said.
NAHB’s forecast has a cumulative shortfall of housing starts of roughly 400,000 units from the middle of this year through the end of 2008, in line with the estimated excess supply generated during the recent boom period.
Finally, the current downswing in home sales and housing production may continue to detract from overall economic growth through mid-2007, but Seiders said that much of this negative impact should be offset by strengthening activity in other sectors of the U.S. economy.
