Housing slump seen as drag on US economy

[NVMojo]

WASHINGTON: The US housing slump will weaken the economy more than previously forecast, prompting the Federal Reserve (Fed) to reduce interest rates by June, a Bloomberg News survey showed.

The economy grew at an annual rate of 2.5 per cent last quarter and will maintain that pace in the final three months of the year, according to the median forecast of 82 economists surveyed from October 2 through October 10. Both estimates are down from the previous month's survey and less than the 2.6 per cent rate in the second quarter reported by the Commerce Department.

"The drag from housing is the key reason why everyone's growth forecasts are coming down," said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts.

Fed policy- makers, who ended a two-year cycle of interest rate increases in August, are watching the housing market as they contemplate their next move.

more...

http://www.btimes.com.my/Current_News/BT/Thursday/Corporate/BT590745.txt/Article/

[hatrack]

1. Uh, no shit. Sure wish I'd gotten that Econ doctorate . . .

:silly:

[TahitiNut]

2. Gee! D'ya s'pose?

The 'For Sale' signs around here (Detroit 'burbs) are becoming permanent fixtures in the lawns - with asking prices dropping steadily. I don't know why folks aren't grabbing them up. After all, in the state with one of the highest unemployment rates and colder climates, what's not to desire? Residential construction will join the sectors with increasing unemployment. Oh, joy.

[robbibaba]

5. Not to mention those big box home improvement stores

We just had a Lowe's open up a mile from Home Depot, which is half a mile from a huge local store. I'm guessing with folk's home equity line of credit ATMs drying up, and not so many do it yourselfer projects, these places are going to be hurting too.

[Human Torch]

3. Actual conversation with a realtor friend from this morning:

ME: "There are 5 "for sale" signs on my street, and it's a SMALL street."

FRIEND: "That's because there are twice as many houses for sale as there were a year ago."

ME: "The townhouse two doors down sold for $450K last summer."

FRIEND: "Right now, it's probably worth $380K."

As much as I hate to see working-class people hurt by any downward housing trends, I seriously hoped that the "house flippers" who caused this mess in the first place get BONED. VERY, VERY BONED.

:patriot:

[Demobrat]

4. The big news is that prices are down from six months or a year ago.

But how about two years ago, or five? If you didn't buy your house last year with a neg-am loan intending to flip it before the intro period ran out, you should be fine.

[ozone_man]

7. In two to five years

the prices that were paid two to five years ago will look ridiculously overpriced. It hasn't begun the big slide yet.

[cliss]

6. This is going to start a slide.....

that will be hard to stop.

The number of 'For Sale' signs on peoples' yards will start to increase. The 'Flippers' are going to start getting nervous. They will feel the pressure to unload their heavy baggage. ANYONE who is having financial problems, or is feeling that the market will start to go down, will put their house up for sale.

Suddenly, you have double the amount of For Sale signs. This will have a cumulative effect of pushing the market down.

SUPPLY = UP

DEMAND = DOWN.

This will be a self-reinforcing cycle which will destroy a lot of speculators.

[AlCzervik]

8. forclosures in sacramento coounty are up 40% over last year, just heard

it this morning on the radio. the prices here have also leveled off and in some areas dropped. I paid $209,000 in 2000 and i feel like i got lucky.