After soaring to record levels for three consecutive years, the single-family housing market is gliding toward a “soft landing” in 2006, as rising interest rates, affordability issues and a reduced role for investors and speculators contribute to declining demand.
That was the consensus of a group of economists who addressed attendees at the recent semi-annual National Association of Home Builders (NAHB) Construction Forecast Conference here.
“After topping out in the third quarter of last year, it is clear that the housing sector is in a period of transition,” said NAHB Chief Economist David Seiders. “Sales and starts are trending lower, toward more sustainable levels.”
Even so, Seiders observed, the slowing in housing is not likely to derail the nation’s expansion, as housing yields its position as the economy’s major growth engine to other economic sectors.
“The housing sector is going through an adjustment, not a collapse,” agreed Michael Moran, chief economist at Daiwa Securities America Inc.
Taking a bullish view, Jim Glassman, managing director of JP Morgan Chase & Co., said, “Real estate is pricing itself back to reality and in the long run it is reasonable to expect starts in the 1.8 million to 2 million range.”
Seiders noted that new-home sales in the first quarter of 2006 were down 10% from the fourth quarter ’05, and said that he expects them to ease further before leveling off in ’07. The NAHB is forecasting that new-home sales will hit 1.13 million units in 2006, down 12% from last year’s all-time high of 1.28 million units.