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ANGELA BARNES The Globe & Mail
http://www.globeinvestor.com/servlet/story/RTGAM.20060817.whousing0817/GIStory/
Thursday, August 17, 2006
National Bank Financial economists don't buy the idea that the housing market in the United States is coasting to a soft landing. And they aren't the only ones pointing to the increasingly disturbing statistics on that market.
Clément Gignac, chief economist and strategist, and Eric Dubé, an economist, noted that U.S. housing starts are already down 20.7 per cent from their January, 2006 peak “and some leading indicators are suggesting more declines are to be expected in the months to come,” they warned in a recent economic comment. They also noted that the National Association of Home Builders reported this week that traffic of prospective buyers had tumbled to its lowest level since 1991, a recession year. Furthermore, U.S. building permits have plummeted 22 per cent from their peak last September.
“These indicators combined with the skyrocketing inventory of new homes for sales are more consistent with a hard landing, rather than a soft landing scenario for the U.S. real estate sector,” the economists said. That makes it important to monitor the impact of the weakening real estate market on house prices and on American consumers' wealth, they said. “While baby boomers are likely to be forced to scale down their irrational exuberance about home prices appreciation, they should soon feel the need to restore their savings rate,” they added, and that could set the stage for a prolonged period of sub-par gross domestic product growth around 2 to 2.5 per cent.
Other economists are also sounding the alarm about the U.S. housing market. David Rosenberg, North American economist at Merrill Lynch & Co. Inc., referred to data from the National Association of Realtors in his morning market memo earlier this week. It showed that 26 metropolitan areas in the U.S. recorded year-over-year price declines in the second quarter. Moreover, he pointed out that “an increasing volume of homes are being put up for auction - one sign of an increasingly distressed market.”
Also this week, the Wall Street Journal published a chart showing the percentage of listed homes in various markets across the U.S. whose prices had been reduced as of Aug. 2. Boston topped the list; 46.4 per cent of the houses listed for sale in that area have had their prices cut. Sacramento, Orange County and San Diego, all in California were the next three on the list. “That we are seeing price quotes coming down in areas like Baltimore and Minneapolis is a sign that, contrary to popular opinion, the mania in residential real estate this cycle was more national than local in scope,” Mr. Rosenberg said.
© The Globe and Mail
http://www.globeinvestor.com/servlet/story/RTGAM.20060817.whousing0817/GIStory/
Thursday, August 17, 2006
National Bank Financial economists don't buy the idea that the housing market in the United States is coasting to a soft landing. And they aren't the only ones pointing to the increasingly disturbing statistics on that market.
Clément Gignac, chief economist and strategist, and Eric Dubé, an economist, noted that U.S. housing starts are already down 20.7 per cent from their January, 2006 peak “and some leading indicators are suggesting more declines are to be expected in the months to come,” they warned in a recent economic comment. They also noted that the National Association of Home Builders reported this week that traffic of prospective buyers had tumbled to its lowest level since 1991, a recession year. Furthermore, U.S. building permits have plummeted 22 per cent from their peak last September.
“These indicators combined with the skyrocketing inventory of new homes for sales are more consistent with a hard landing, rather than a soft landing scenario for the U.S. real estate sector,” the economists said. That makes it important to monitor the impact of the weakening real estate market on house prices and on American consumers' wealth, they said. “While baby boomers are likely to be forced to scale down their irrational exuberance about home prices appreciation, they should soon feel the need to restore their savings rate,” they added, and that could set the stage for a prolonged period of sub-par gross domestic product growth around 2 to 2.5 per cent.
Other economists are also sounding the alarm about the U.S. housing market. David Rosenberg, North American economist at Merrill Lynch & Co. Inc., referred to data from the National Association of Realtors in his morning market memo earlier this week. It showed that 26 metropolitan areas in the U.S. recorded year-over-year price declines in the second quarter. Moreover, he pointed out that “an increasing volume of homes are being put up for auction - one sign of an increasingly distressed market.”
Also this week, the Wall Street Journal published a chart showing the percentage of listed homes in various markets across the U.S. whose prices had been reduced as of Aug. 2. Boston topped the list; 46.4 per cent of the houses listed for sale in that area have had their prices cut. Sacramento, Orange County and San Diego, all in California were the next three on the list. “That we are seeing price quotes coming down in areas like Baltimore and Minneapolis is a sign that, contrary to popular opinion, the mania in residential real estate this cycle was more national than local in scope,” Mr. Rosenberg said.
© The Globe and Mail