On the inflation front, Moran believes the outlook "looks pretty good" and that the nation's central bank has sufficient leeway to cut rates again, "but not dramatically. The Fed won't adjust monetary policy to rescue the housing market. It will take a macroeconomic outlook."
Predicting that consumer spending will hold up as job and income growth remain positive, all of the panelists pegged the odds of a recession within the next 12 months at between 30 percent and 40 percent.
"The real driving force in personal spending is net worth in the consumer sector, not home equity," said Moran. "Consumers won't back away because household balance sheets are in good shape."
The regional view
From a regional point of view, Arizona, California, Florida, Nevada and the broader Boston and Washington, D.C., metro areas will be most affected by the negative economic fallout from the subprime mortgage crisis, according to Mark Zandi, chief economist at Moody's Economy.com. Also affected will be areas along the New Jersey coast, the Carolinas, and parts of the industrial Midwest. Regional economies in these areas, he predicted, will encounter more severe declines in construction and housing prices along with weaker consumer spending and significant job losses in housing-related businesses than other markets across the country.
Places that are experiencing the most significant weakening of economic activity at present include Phoenix, parts of central and southern California, Las Vegas and Reno, Nev., as well as parts of Florida's east and west coasts, said Zandi. He expects housing activity in these areas to bottom out in late 2008 "at best."
Bernard Markstein, NAHB's Director of Forecasting, put today's housing picture into greater historical context. Explaining that although year-over-year numbers for home prices and production are indeed expected to show substantial declines while the downturn continues, he noted that last year's housing statistics (which were clearly unsustainable) are not the ideal comparison for current activity. If instead, for example, you were to compare anticipated starts activity to the 2002-2003 levels that offer a more "normal" benchmark, you would not have to look too far down the road to see a return to equilibrium in 2008-2009.
Markstein agreed that the biggest house-price declines will be relatively localized in the California, Florida, Nevada, upper Northeast and Midwest markets, but he also pointed out that in quite a few housing markets, prices are still rising. Whether you consider this good news or bad, he said, it's a far different story than what most people have gleaned from the media headlines. In fact, with just a few notable exceptions, most of the country's metropolitan statistical areas have recorded little or no decline in house prices between their recent peaks and the second quarter of 2007. The bottom line is that, while rapid price gains are a thing of the past, a lot of home owners are "still in good shape" with regard to their home values.
