Expert forecasts rebound in 2009
December 21, 2007
BY GRETA GUEST
FREE PRESS BUSINESS WRITER
Earlier predictions that the housing market would recover early next year seem all too rosy now after months of struggles in the subprime mortgage market and a cascade of foreclosures.
David Seiders, chief economist with the National Association of Home Builders, cut his forecast for 2008 and now expects housing to pick up in 2009 nationwide after hitting bottom in the middle of next year.
"It's awfully fair to say the year ended up much weaker ... 15% below what I expected at the beginning of the year," Seiders said on a conference call Thursday. "For 2008 as a whole, I am looking at an overall down year."
Southeast Michigan's market recovery will lag as the slowdown in the auto industry continues, he said. Michigan has lost about 9% of its jobs since 2000 and has one of the nation's highest unemployment rates at 7.4%.
"I hate to say it but the Detroit area, southeast Michigan, is one of the weakest parts of the U.S. economy," Seiders said. "I think there everything really does depend on how the job market is going to perform, and I don't see that improving soon. I think the housing activity will remain low there for the next couple of years."
Drew Sygit, a certified mortgage and equity planner for Meadowbrook Mortgage in Bloomfield Hills, said he expects home values to continue to decline next year in metro Detroit.
"The overall housing market is going to continue to be hammered by the foreclosures," he said. "In March, we expect the peak of adjustable rate mortgages with $110 billion adjusting. Less than 10% will go to foreclosure, but it's still a big number and it will hit the Detroit market."
Seiders said the overall economy is slowing in the fourth quarter and it has hit a rough patch where the probability of a recession has increased quickly. He expects home prices, which have fallen 5% this year, to drop by 10% to 15% from the peak in 2005.
"We are right now in a danger zone," he said. "The overall economy ... it is touchy, but I think we will get through it without an actual recession."
By the middle of 2008, he predicts the bottom for new home sales will be hit with sales down 45% from the 2004-05 peak. And single-family housing starts are expected to decline 55% from the peak.
The bright spot is the rental market, which has been performing well as some people who lost their homes or are unable to get credit are renting.
Other highlights of the home builders' forecast:
• Residential remodeling is expected to fall by 5% next year and resume a recovery with the rest of the market in 2009, Seiders said.
• The contraction in the housing market cut 1% from gross domestic product in the third quarter, he said.
• More than 90% of homebuilders have negative outlooks or are under review for downgrade, Moody's Investors Service said in a Thursday report on the credit quality of nonfinancial companies.
• And 33% of building materials companies have negative outlooks, according to the report.
• Builder confidence remains at an all-time low in December. And housing starts fell 3.7% in November as builders slowed production to let demand catch up.
December 21, 2007
BY GRETA GUEST
FREE PRESS BUSINESS WRITER
Earlier predictions that the housing market would recover early next year seem all too rosy now after months of struggles in the subprime mortgage market and a cascade of foreclosures.
David Seiders, chief economist with the National Association of Home Builders, cut his forecast for 2008 and now expects housing to pick up in 2009 nationwide after hitting bottom in the middle of next year.
"It's awfully fair to say the year ended up much weaker ... 15% below what I expected at the beginning of the year," Seiders said on a conference call Thursday. "For 2008 as a whole, I am looking at an overall down year."
Southeast Michigan's market recovery will lag as the slowdown in the auto industry continues, he said. Michigan has lost about 9% of its jobs since 2000 and has one of the nation's highest unemployment rates at 7.4%.
"I hate to say it but the Detroit area, southeast Michigan, is one of the weakest parts of the U.S. economy," Seiders said. "I think there everything really does depend on how the job market is going to perform, and I don't see that improving soon. I think the housing activity will remain low there for the next couple of years."
Drew Sygit, a certified mortgage and equity planner for Meadowbrook Mortgage in Bloomfield Hills, said he expects home values to continue to decline next year in metro Detroit.
"The overall housing market is going to continue to be hammered by the foreclosures," he said. "In March, we expect the peak of adjustable rate mortgages with $110 billion adjusting. Less than 10% will go to foreclosure, but it's still a big number and it will hit the Detroit market."
Seiders said the overall economy is slowing in the fourth quarter and it has hit a rough patch where the probability of a recession has increased quickly. He expects home prices, which have fallen 5% this year, to drop by 10% to 15% from the peak in 2005.
"We are right now in a danger zone," he said. "The overall economy ... it is touchy, but I think we will get through it without an actual recession."
By the middle of 2008, he predicts the bottom for new home sales will be hit with sales down 45% from the 2004-05 peak. And single-family housing starts are expected to decline 55% from the peak.
The bright spot is the rental market, which has been performing well as some people who lost their homes or are unable to get credit are renting.
Other highlights of the home builders' forecast:
• Residential remodeling is expected to fall by 5% next year and resume a recovery with the rest of the market in 2009, Seiders said.
• The contraction in the housing market cut 1% from gross domestic product in the third quarter, he said.
• More than 90% of homebuilders have negative outlooks or are under review for downgrade, Moody's Investors Service said in a Thursday report on the credit quality of nonfinancial companies.
• And 33% of building materials companies have negative outlooks, according to the report.
• Builder confidence remains at an all-time low in December. And housing starts fell 3.7% in November as builders slowed production to let demand catch up.
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