Magazine article American Banker

Wild Wall Street Raises Fears That Homebuyers Will Be Scared Off

Magazine article American Banker

Wild Wall Street Raises Fears That Homebuyers Will Be Scared Off

Article excerpt

Home building industry experts worry that the recent stock market slump may dampen consumers' interest in buying homes.

Though the equity market rout has caused interest rates to fall, making housing more affordable, it also threatens to erode consumer confidence and personal wealth, they said.

"Until now we've been viewing the housing sector as a sort of net beneficiary of the foreign-sector mess," said David Seiders, chief economist at the National Association of Home Builders. "The tone of things really is different now in the last couple of weeks. We are worried about a more serious stock market correction than we had been expecting."

Even before the latest crisis erupted in Russia and the stock market tanked last month, the trade group had been expecting the housing market to peak around midyear, Mr. Seiders said. The group expects single-family housing starts to total 1.231 million this year, up nearly 8% from last year, but to fall almost 5%, to 1.172 million, in 1999.

Last week Peter Dannenbaum, an analyst at Morgan Stanley Dean Witter, cut his ratings on home builders Lennar Corp., Pulte Corp., and MDC Holdings, arguing that the current housing boom is unsustainable.

In a research note to clients, he noted that so far this year, housing starts are up 9%, at 1.25 million, well over "what is generally viewed as the demographically sustainable pace of 1.1 million starts" per year.

Demand for housing "may remain at robust levels near-term," Mr. …

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