A VIEW OF THE BOTTOM

From: ECONOMIC FOCUS

Volume 13, Issue 6
For the week of February 16, 2009
A VIEW OF THE BOTTOM
Celia Chen of Economy.com delivers some of the most insightful and accurate observations in the industry. Recently, she published her commentary, "Housing in Crisis: A Bottom Comes Into View", in which she highlighted some interesting observations and predictions:
"The worst housing downturn in memory will stabilize by the end of the year.
The severe correction has helped to rebalance many of the excesses that built up earlier in the decade.
Although economic conditions are dark, swift and strong policy action will help end the correction.
The subsequent recovery in housing markets will be weak.”
The main theme is that the U.S. housing market has gone from bad to worse and dragged the broader economy into a serious downturn. Washington has not yet been able to break the downward spiral. But key to her prediction is that President Obama and the new Congress will quickly act to stimulate the economy and to mitigate mortgage foreclosures.
What Is The Evidence Of A Bottom?
"Prices are coming back to earth", say Ms. Chen. This is evidenced by many of the pricing excesses of recent years having corrected, noting that housing prices have fallen in about 70% of all metro areas, according to Fiserv's Case-Shiller home price index.
"Counting on help - thus, notwithstanding the intensifying economic gloom, the bottom of the nation’s housing downturn is coming into view. This outlook assumes stronger action by policymakers. Even with further government intervention, the recession will keep the housing market form fully recovering until the end of 2009. But with such help, sales are likely at bottom, stabilized by foreclosures. Construction will hit bottom in the first half of this year, although the pace of housing starts will remain depressed until 2011. The national Chase-Shiller house price index will stabilize by year end. From peak to trough, Moody’s Economy.com expects that total single-family home sales will have declined by 40%, housing starts by 70%, and the CSI by about 36%."
"...if the government is unable to implement an effective plan, the housing market could weaken further. In our worst-case scenario, depreciation in house prices would continue and deepen for a total 45% peak-to-trough decline."
WASHINGTON, ARE YOU LISTENING?? Key Economic Reports Released This Week
RELEASEDATE
ECONOMICINDICATORS
RELEASEDBY
CONSENSUS
Wt.
INFLUENCE ONINTEREST RATES
Tue 02/171:00 pm et
Weekly Bill Auction
Dept. of the Treasury
N/A
**
If strong demand If weak demand
Tue 02/171:00 pm et
NAHB Housing Indexfor Feb '09
National Associationof Home Builders
N/A
**
Undetermined
Wed 02/187:00 am et
MBA Mog Apps Survey for week ending 02/13
Mortgage Bankers Association of America
N/A
*
Undetermined
Wed 02/188:30 am et
Housing Sts / Bldg Permitsfor Jan '09
Bureau of the CensusDept. of Commerce
530.00M
***
If above consensus If below consensus
Wed 02/188:30 am et
Import & Export Pricesfor Jan '09
Bur. of Labor StatisticsDepartment of Labor
ImPrice -1.5%
*
If above consensus If below consensus
Wed 02/189:15 am et
Ind Prod/Cap Utilizationfor Jan '09
Federal Reserve Board
IP -1.4%CU 72.4%
***
If above consensus If below consensus
Wed 02/182:00 pm et
FOMC Meetingsfor 01/27 - 01/28 meeting
Federal Reserve BoardFed Open Market Committee
N/A
****
Determines Policy
Thu 02/198:30 am et
Jobless Claimsfor weekending 02/14
Bur. of Labor StatisticsDepartment of Labor
623K
*
If above consensus If below consensus
Thu 02/198:30 am et
Producer Price Indexfor Jan '09
Bur. of Labor StatisticsDepartment of Labor
0.2%core 0.1%
***
If above consensus If below consensus
Thu 02/1910:00 am et
Philadelphia Fed Surveyfor Feb '09
Federal Reserve Board
-25.0
**
Undetermined
Fri 02/208:30 am et
Consumer Price Indexfor Jan ' 09
Bur. of Labor StatisticsDepartment of Labor
0.3%core 0.1%
***
If above consensus If below consensus
* Low Importance
** Moderate Importance
*** Important
**** Very Important