Economists Try to Build Hope Against Facts at International Builders Show in Orlando

Residential News » Residential Real Estate Edition | By David Barley | January 13, 2011 12:24 PM ET

(ORLANDO, FL) -- Two housing economists, Frank Nothaft who is chief economist for Freddie Mac and David Crowe the chief economist at the National Association of Home Builders did their best to build a case for some optimism. Nothaf is predicting a 20% rise in home building for 2011. Both economists acknowledged that any increase would be starting "off a really low base".

Both economists agreed that the housing economy has bottomed out and cited several positive factors including low mortgage rates, lower asking prices for new and existing houses and marginally better numbers in the economy as a whole. Crowe forecasts slow but steady growth going forward and will build momentum.

Of the eleven months of home sales in 2010, seven broke new low records on a sequential basis. Remodeling spending has increased indicating consumers are remodeling rather than moving. Frank Nothaft with Freddie Mac says that unemployment is "moving in the right direction".

Other positive factors mentioned are:

  • Homes are affordable and mortgage rates are the lowest "since the 50's".
  • There is pent up demand for new rental units and rents are stable or rising especially "for professionally managed large properties" according to Nothaft.
  • There is pent up demand of 2,000,000 household that were not formed because of the economy.
  • Younger people are staying longer with their parents who would have normally have formed households.

Frank Nothaft noted that "Housing markets are local and not national" and showed a map of price declines by state. Florida and California values have sunk 40%, Nevada 50% and Texas by only 2%.

In the question and answer period when asked about the effect of the interest deduction being taken away through legislation Crowe admitted that is would "significantly crush sales and value....It would be awful, but I think at the end of the day the deduction would not be changed that dramatically." He mentioned that there would be fierce lobbying against any such measure.

Both economists agreed that it would take "at least" two more years before there is a balance between buyers and sellers.


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