> Wall Street Journal - December 7, 2005
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> Investors Retreat
> From Housing Market
Updated 12/7/2005 9:57 AM
Sustained decline forecast in U.S. housing market
By Alex Veiga, Associated Press
http://www.usatoday.com/money/economy/housing/2005-12-07-ucla_x.htm?csp=34#
LOS ANGELES - The U.S. housing market will see a sustained decline next year, causing a drag on the nation's economy but falling short of triggering a recession, according to the quarterly UCLA Anderson Forecast.
"We expect housing to start slowing the economy this quarter or the next," writes Edward Leamer, director of the University of California, Los Angeles, Anderson Forecast.
"Some jobs in manufacturing might well disappear as a result of weakness in housing," he writes.
The cooldown in the housing sector is likely to be spread over several years, with as many 500,000 construction jobs and 300,000 financial sector jobs lost, according to the report.
The forecast notes that eight of the last 10 economic recessions began with housing market slowdowns.
Previous UCLA Anderson Forecasts suggested that a decline in housing construction would begin by the middle of this year.
The current report cites several signs that the decline could be under way:
. New construction of housing in October was down 5.6% from the previous month, with new construction of single-family housing accounting for a 3.7% dip.
. New-home sales have declined.
. Applications for home mortgages have trended downward since late September as rates increased.
. In some regions, homes are remaining unsold longer and the pace of housing construction is outpacing population growth, which could spell a decline in demand.
"On all these grounds, we believe housing is due for a sustained decline," economist Michael Bazdarich writes in the Anderson Forecast. "The remaining questions are how hard the fall will be and when it will begin."
The forecast for California, where housing prices lead the nation and housing-related jobs have been driving economic growth, resembles the national outlook.
Economist Ryan Ratcliff says the state's housing market will see a slowdown in spending along with job losses in construction and related sectors.
He expects California home prices to plateau while sales and new construction see moderate decreases during two years of weak growth.
"If the housing market slows more than we are expecting, a recession is not out of the question," Ratcliff writes.
Signs of a slowdown are cited in San Francisco County, where housing sales have been off 20% since peaking in June, 2004, and in San Diego County, which has seen sales slow about 13%, while monthly price gains have plummeted to low single digits.
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