Tags: Moodys | Zandi | housing | homes

Moody’s Zandi: Expect Turnaround in Housing by This Time Next Year

Tuesday, 17 April 2012 11:17 AM

The U.S. housing sector is bumping along the bottom now and will be well on its way to improving by this time next year, says Mark Zandi, chief economist at Moody's Analytics.

The National Association of Home Builders/Wells Fargo Housing Market index, which reflects builder confidence in the sector, dropped to 25 from 28 in March, missing expectations, although such a setback isn't a sign of serious decline.

Meanwhile, groundbreaking on homes fell unexpectedly in March, but permits for future construction rose to their highest level in 3 1/2 years, Commerce Department data showed.  Housing starts slipped 5.8 percent to a seasonally adjusted annual rate of 654,000 units, the government said. February's starts were revised down to a 694,000-unit pace from a previously reported 698,000 unit rate.

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But new permits for home construction surged. Permits rose 4.5 percent to a 747,000-unit pace last month, the highest since September 2008 and beating economists' expectations for a 710,000-unit pace.

"The housing crash is now over ... and by this time next year, housing will no longer be a drag for the economy but a tailwind," Zandi tells Yahoo's The Daily Ticker.

Spring sales should come in okay thanks to low prices, Zandi adds.

"House prices are now low enough relative to incomes that single family housing is about as affordable as it's ever been in the data we have going back to World War II," Zandi says.

"Investors can come in, buy homes, rent them, cover costs and look for a capital gain down the road," he says.

Eventually, rents will rise to the point that buying will serve as a better option.

"Another year from now if prices stay flat and rents rise another 4 percent, 5 percent or 6 percent, then the decision to rent or buy will be firmly in favor of buying rather than renting," Zandi says, adding that's already the case in some parts of the country.

The National Association of Home Builders points that despite March's decline, the index is still at its highest since 2007.

"Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase, and our members are realigning their expectations somewhat until they see more actual signed sales contracts,” Barry Rutenberg, chairman of the National Association of Home Builders and a home builder from Gainesville, Fla., says in a statement

"What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September," the association's Chief Economist David Crowe adds.

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Tuesday, 17 April 2012 11:17 AM
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