The NAHB’s resources enable it to collect some of the most accurate data regarding the current state of the housing industry, as well as forecasts for the future.
In his most recent annual forecast for the NAHB, Seiders predicts new home starts—the number of new homes to begin construction—to “be down 50 percent from the recent peak, which was at the very beginning of 2006.”
Existing home inventory is also running high. “Right now we are at nine months’ worth of inventory nationwide,” said Howard. “In a stable market you want about four to five months of inventory. We’ve got to sell a significant number of homes before things pick up.”
The worry amongst economists throughout the country is that weak housing market will drag America into a recession.
“Well, it’s certainly true that the housing downswing of the past two years essentially has been putting a heavy hit on overall economic growth in the county,” said Seiders. “So far, the overall economy has been able to shake this off really well, with other sectors moving in and taking up some of the slack. I think right now we are entering a fairly sensitive period for the housing market and for the economy overall.”
Indeed, it seems that North Carolina as a whole has been one of the least-affected states in the country in terms of the housing crisis. Said Seiders, “We still see healthy appreciation in parts of the Carolinas. Texas markets still see good price behavior, and the upper Northwest is still doing pretty well.”
But it’s the financial aspect of this current situation that has transformed a few regional housing bubbles into a national housing crisis. No region or state is immune from the record number of foreclosures affecting homeowners throughout the country. In October alone, a new record was set with 225,000 foreclosures nationwide. Analysts fear that more are on the way.
“I think we are on the precipice of a foreclosure crisis. How [our policy makers] react to it and how quickly they react to it will determine if we have one or not,” said Howard.
According to Seiders, the worst is yet to come in terms of foreclosures. As many as 2 million foreclosures are possible in 2008, nearly all of them falling into a certain “vintage” of mortgages. These mortgages are primarily subprime, adjustable-rate loans originated between mid-2005 and the end of 2006 when lenders were most aggressive with their underwriting, and prices were at their zenith. In the coming year, the low “teaser rates” on these mortgages will expire, and the monthly payment the owners are required to pay will increase—often dramatically. Whether or not the owners can make those payments will determine the number of new foreclosures.
“It doesn’t take an economist to see that 2 million more units [added to inventory] will take longer for the industry to settle,” said Howard. He is hopeful that the government will step in to help keep people in their homes.
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