Fiscal and monetary policies are in rare, "perfect" alignment to produce a genuine stimulus to the economy next year, setting the stage for steady 4.25 to 4.5 percent growth in the economy and a strong year ahead for housing, predicts Joel Prakken, chairman of Macroeconomic Advisors. Prakken was one of a number of housing economists who predicted "vigorous" growth for housing next year during the recent NAHB Construction Forecast Conference at the National Housing Center in Washington, D.C.
"The general public doesn't really think we're in a recovery because of the job market," said David Seiders, NAHB chief economist and host of the event. But expectations of a surge in gross domestic output, low interest rates through next year, and evidence of renewed private sector investment far outweighed whatever clouds might rain on the housing parade. The conference's optimistic forecasts may have been conservative: The 7.2 percent quarterly gain in GDP reported by the Commerce Department one week after the conference exceeded all the economists' forecasts.
Unemployment clearly remains a dark cloud. Mark Zandi, chief economist for Economy.com, predicts it will be 2005 before many metro markets begin to see sustained job recovery. The amount of mortgage credit needed to keep up with housing demand may also become a concern, said Frank Nothaft, chief economist for Freddie Mac. During the next decade, immigration and new household formations will fuel demand for $22 trillion in mortgage originations for 115 million homes, including 17 million first-time home buyers.