Will Lower Rates Give the Housing Sector Enough Steam to Lift the Economy out of a Recession?

By Kleege, Stephen | American Banker, January 6, 1992 | Go to article overview

Will Lower Rates Give the Housing Sector Enough Steam to Lift the Economy out of a Recession?


Kleege, Stephen, American Banker


Q Will lower rates give the housing sector enough steam to lift the economy out of a recession?

* David Seiders

Economist National Association of Home Builders, Washington

These various statistics have been bouncing around a bit, but fundamentally, they're telling us things have flattened out since the middle of the year. I think ther is certainly some impact from lower interest rates in the numbers, though. We know consumer confidence remained low in October, November, and December. Job growth also was not the material for an upswing in housing. Fortunately, the interest declines came at the same time.

We forecast stabilization and a slow recovery in 1992, and one of the key factors is the low interests rates.

* Barbara Allen

Home building analyst Kidder Peabody Inc., New York

As long as the banks are unwilling to offer financing to the construction industry, I don't know how you're going to get a strong number. In fact, some of the strength in the existing-home sales may reflect spillover demand for new homes that is not being met.

What you need to stimulate the economy is to reach out and get 1% to 1.5% of the households to buy new homes. But the lower rates aren't helping. Ultimately, existing homes sales will help the economy, because people have to pay for improvements and furnishings. But they're not nearly as quick a stimulant to the economy as new construction.

* Warren Lasko

Executive vice president Mortgage Bankers, Association, Washington

I think housing is unquestionably still very sick. It may not be flat on its back, it's only up on its elbows after being knocked down last January.

Certainly lower interest rates are good, but they're not enough.

This is the first recession going back to the depression that there has been no federal stimulus to housing. …

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