Placing the blame for the housing recession squarely at the feet of the mortgage market meltdown, NAHB CEO Jerry Howard and chief economist David Seiders warned of another bleak year for housing in 2008, during the NAHB's year-end Housing Forecast call on Thursday.
Exacerbating the situation is the slowdown in the overall United States economy, as housing and mortgage problems have spilled over and tightened credit conditions economy-wide.
"It's fair to say that the overall economy is slowing pretty dramatically in the fourth quarter," Seiders says. "We have really hit what we call a rough patch."
Noting that the chances of recession have increased in just the last few weeks, Seiders now estimates a 40 percent chance of recession where just a month or two ago he projected a 30 percent chance. Other economists project as much as a 60 percent chance that a recession will occur.
Yet Seiders offered a positive spin on some of the industry's most dreadful data. The NAHB/Wells Fargo Housing Market Index, for the last three months, has been sitting at its record low score of 19. The series began in 1985, and a score of 50 denotes equilibrium between positive and negative thinking by builders on sales conditions. The high score was a 72 in mid-2005.
Seiders suggests the stabilizing score, even at a record-low, is a sign of bottoming in new-home sales activity. Seiders also points to the NAHB's monthly survey of builders to suggest that there is some evidence of decreasing cancellations, another positive signal of stabilizing demand, he says.
Still, Seiders says housing prices, currently 5 percent off their peak, will not bottom until early 2009, down 10 to 15 percent off their 2006 peaks.
Seiders estimates bottoming of sales in the first quarter of 2008, down 45 percent from their 2005 peak.
Single-family starts will bottom out in the second quarter of 2008, down 55 percent from their peak, Seiders says. The boom years of 2003, 2004, and 2005 saw things overheat so far, that housing is still in a cooling process.
"A lot of what's happened since then can be labeled a correction process, a getting back to reality," Seiders says.
But, he added, by the time the housing recession ends, greener pastures will be ahead of home builders.
"There will be lots of growth room for the housing sector," Seiders says of the future.