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Archive for Tuesday, February 14, 2006

Bush predicts housing slowdown

President confident economy will remain strong

February 14, 2006

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— The high-flying housing market should make a safe landing by gradually losing altitude, the White House suggested Monday.

Housing has been an important source of power for the economy as home sales hit record highs during the past five years. Low mortgage rates were a factor behind brisk housing activity.

"A gradual slowing of homebuilding appears more likely than a sharp drop because the elevated level of house prices will sustain homebuilding as a profitable enterprise for some time," according to President Bush's annual economic report to Congress.

The direction of the housing market is being watched. Most private analysts also are expecting gradual moderation. If the housing market were to collapse, it would pose grave dangers to the country's overall economic health.

House prices, which have risen rapidly in value, also will probably see slower growth this year, said Matthew Slaughter, a member of the White House's Council of Economic Advisers.

Even with a housing slowdown, the economy is expected to log respectable economic growth this year, according to the White House's projections.

The president's report projects that the economy will grow by 3.4 percent as measured from the fourth quarter of last year to the fourth quarter of this year. In 2007, the economy should register another solid year, growing by 3.3 percent.

The president's report said economic challenges include: health care costs, the massive strain on federal resources that will come from the looming retirement of millions, and trade and budget deficits.

Comments

Ragingbear 8 years, 10 months ago

So let me get this straight, houses are going to randomly evaporate? There isn't much of a housing market right now. Most of the resources are going into hurricane recovery efforts.

Richard Heckler 8 years, 10 months ago

A massive strain on federal resources is certainly a result of an area the president pretends does not exist:

http://www.corpwatch.org/article.php?id=13258

http://www.corpwatch.org/article.php?id=13249

http://www.corpwatch.org/article.php?id=12675

Baby boomer retirement plans are not placing current plans under stress however a new plan would be extremely expensive to taxpayers. Reading through this carefully will explain why:

http://www.dollarsandsense.org/0505orr.html

just_another_bozo_on_this_bus 8 years, 10 months ago

The headline says that Bush has made a prediction about the housing market. But what really happened is that a report was submitted by someone associated with the White House. Dollars to donuts says Bush hasn't even read this report, couldn't engage in much more than a couple seconds of likely inaccurate discussion of it, and he contributed absolutely nothing to it.

formerlyKS 8 years, 10 months ago

Well that makes me feel better, Bush predicts a "so-called" soft landing for housing.

Anybody with half a brain can already see the housing market on the coasts is in serious trouble. Foreclosures are up triple-quadruple what they were this time last year in many California counties; scores of "interest only" loans are resetting after several years of teaser rates of only 2 or 3 percent. The only home buying going on right now involves people selling one overpriced house for another overpriced house. A Ponzi scheme can only continue to work as long as there are willing buyers coming in from the bottom, and with higher interest rates, even the loose money of the past is becoming increasingly difficult to secure. As interest rates continue to ascend, housing will, in the short run, become even more unaffordable, that is, until speculators have their inventory foreclosed on in mass. From central California, there is quite a bit of panic selling already going on. Housing inventory has increased sharply (5 fold in many smaller communities in the last year), builders continue to build, and prices in many markets are already off around 10 percent. In the process of reverting to the mean, underlying fundamental value of property, the curve usually overshoots. I can't wait for another three or four years when property in many coastal areas will be half what it currently is. Think it can't happen? The early 1990s witnessed a broad recession sparked by the demise of the aerospace industry along with already high housing prices and people relocating out of state to cheaper digs. From 1990 to 1997, many places in LA witnessed housing prices down some 40 percent. Once real estate goes bust and all the supporting lending and construction jobs go down the tubes, that will be a very plausible scenario once again.

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