It seems every time I start thinking it’s safe to use the “R” word (recovery) about the housing market, something happens to put the damper on it. The recent downgrading of the U.S. credit rating, which ultimately caused the Wall Street roller coaster ride, certainly hasn’t help. Then today, the National Association of Home Builders (NAHB) came out with a report saying “the recent economic news points to a slower housing recovery” and Fannie Mae, in their economic forecast released today saying “housing activity expected to weaken, despite recent declines in long-term interest rates”.
Highlights of the NAHB Report:
- Recent economic bad news is probably not going to push us into a double-dip recession, but it will take the wind out of already feeble growth in housing activity
- “A convergence of worrisome developments has set back the outlook for housing and the economy, noted NAHB Chief Economist David Crowe, starting with significantly weaker than expected growth in the gross domestic product during the first half of this year.”
- The financial and economic turmoil in Europe is going to spill over to the U.S.
- The Fed Reserve’s announcement they will keep interest rates low through mid 2013 confirmed downside risks for the economy (wait, I thought low interest rates were good?).
- Finally, the quote from David Crowe, the chief economist for NAHB that I think does a great job of illustrating the situation our economy is in: “Comparing the economy to a very slow bicycle, the slower and slower we get, the easier it is for the bicycle to tip over,” something could come from left field to precipitate another downturn.”
Highlights of the Fannie Mae Report:
- Like NAHB, Fannie Mae is not forecasting a double dip recession however, they do say “the probability of another recession is close to a coin toss.”
- Fannie Mae Chief Economist Doug Duncan said “key factors, including revisions to gross domestic product (GDP) data, have revealed that we have a bigger hole to dig out of, which explains the consumer angst over the lack of employment growth.”
- Fannie Mae’s data for July shows that 70 percent of Americans think the economy is on the wrong track, up from 60 percent a year ago. In turn, despite historically low interest rates, consumers are still saying they don’t see this as a good time to go out and borrow money to buy a house.“
- Housing activity is expected to weaken along with the overall economy due to a renewed decline in business and consumer confidence and a softening hiring trend. One exception is the rental housing market. The rental vacancy rate plunged from 9.7 percent to 9.2 percent in the second quarter of 2011, the lowest rate in nine years. This is consistent with the declining trend in the homeownership rate, indicating that a rising share of households have shifted to renting over owning.
At least there is a silver lining….the rental market. So, if you can’t bring yourself to buy a home for yourself due to concerns about jobs or the economy, perhaps you should consider buying rental property and becoming a land lord?
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