Although the landing won't be as soft as previously expected, the housing market's current downsizing will not drag the economy into recession, concluded experts during a late-September teleconference held by the National Association of Home Builders (NAHB), Washington, D.C.
Despite the sky-is-falling rhetoric of many in the financial media, the housing market is experiencing an inevitable, unavoidable and badly needed-yet orderly-correction from the "overheated" period of the last couple of years, according to Michael Moran, chief economist for Daiwa Securities America Inc., New York.
"If you look at where we stand now, we are right in line with where we were in 2003-at the time it was a record year," said Moran. "All we have done so far is squeeze out the exuberance that was in place in 2004-2005 and move to a level of activity that, at the time, was viewed as quite good."
In comparing single-family housing starts to new-home sales, Moran pointed out that starts are slowing more sharply than sales-another indication that the industry will adjust fairly quickly.
"We are in line with the 2003 average for sales, but far below the average for starts, showing that builders are taking the steps they need to take in order to get inventories under control," said Moran.
Noting that housing is now a major source of weakness for the economy, Nariman Behravesh, chief economist for Global Insight, Waltham, Massachusetts, said, "The good news is that other sectors are doing reasonably well, and will continue" to do so. Corporate cash flow is at record levels, and that capital will be used to invest in equipment and structures and create some new jobs, he said. …