Mark Zandi, Chief Economist, Moody's Economy.Com
Wisniowski, Charles, Mortgage Banking
Even if the name Mark Zandi doesn't ring a bell, there's a better-than-average chance you at least know his work. As chief economist for the newly rechristened Moody's Economy.com, West Chester, Pennsylvania, Zandi directs the company's research and consulting activities, which include macroeconomic, financial, industry and regional economics.
Zandi's recent work includes a study of the outlook for national and regional housing market conditions, the determinants of personal bankruptcy, the location of high-technology centers and the impact of globalization and technology change on real estate markets.
Zandi also serves as a go-to expert for the mainstream and business media. The list of print and broadcast news outlets in which he has been quoted includes The Wall Street Journal, Financial Times, Barron's, Newsweek and USA Today, as well as the BBC, all three nightly network newscasts, CNN and CNBC.
Zandi earned his doctorate in economics at the University of Pennsylvania, Philadelphia, and his B.S. degree in economics at the Wharton School at the University of Pennsylvania.
Mortgage Banking caught up with Zandi a short time after the deal closed with New York-based Moody's Corporation, parent company of Moody's Investors Service, to purchase the former Economy.com for $27 million. Zandi shared his outlook for the housing market and other housing trends in 2006.
Q: Can you summarize your outlook for the housing market and for the economy in general in 2006?
A: I think the economic outlook is good. The expansion will remain intact. Top-line GDP [gross domestic product] growth will be about 3 1/2 percent, roughly what we'll get ... in 2005. And job growth will be comparable with a couple-million-plus jobs created in 2006, which is on par with 2005. Broadly speaking, the economy should perform well.
The first half of 2006 will be better than the second half. The first half will be juiced up by rebuilding in the Gulf [Coast region]. The second half [of 2006] will be on the soft side because the rebuilding ends, and I do think the housing market will weaken appreciably by then.
I think housing is peaking and all roads lead down; it's just a question of how steeply. I think sales, house-price growth and home building will all be weaker by this time next year.
Q: As housing slows, do you see a soft landing, or is housing more in line for a more drastic deceleration--or is that an open question right now?
A: It's a bumpy landing. I don't think we're going to crash, but I don't think it's going to be smooth, either. It's going to feel painful, particularly in the context of the boom times the market has experienced over the past five years, but I don't think it's going to crash. I don't think we're going to see large national nominal house-price declines. But I do think pricing goes flat.
Q: What are the wider economic implications of a housing market slowdown? Is the rest of the economy in a position to pick up the slack or will weaker housing-along with rising interest rates, higher fuel and heating bills--hurt consumers enough to slow their spending?
A: I think housing's slowdown will be felt by the broader economy, particularly again toward the second half of . Housing has been a key engine of growth. Just to give you a number, [housing] added about a percentage point to growth, I think, in 2005. In 2006, it will be neutral with respect to the economy--adding a little bit of growth in the first half of the year and subtracting a little bit in the second half.
So the economy is going to feel it, particularly toward the end of the year, and the economy will need another source of growth by early 2007 to pick up some of the slack left by the weakening housing market.
Q: You've expressed concern about a very weak 2007. Can you elaborate on that a little more? …