Hope or Doom in 2008?

by Peter G. Miller
November 29th, 2007

Here are two news releases obtained in the past few days that offer directly opposing views on the near-term real estate market:

From the National Association of Home Builders:

WASHINGTON, November 29 — New single-family home sales edged up 1.7 percent in October following a dramatic downward revision to the preliminary estimate for September, the U.S. Commerce Department reported today. October’s seasonally adjusted annual rate of 728,000 units was 23.5 percent below a year ago.

“The progressive tightening of mortgage lending conditions during 2007 has been the major factor behind the setback in home sales this year,” said David Seiders, chief economist at the National Association of Home Builders (NAHB). “NAHB expects home sales to begin a gradual recovery in the early part of 2008.”

From the U.S. Conference of Mayors

Detroit, MI – The U.S. Conference of Mayors unveiled today an economic impact report on the foreclosure crisis that forecasts sharp losses in the growth of gross domestic product and projects economic output losses for 361 metro areas — referred to as gross metropolitan product (GMP). The total GDP growth loss equals $166 billion, with the combined economic loss of the top ten metro areas exceeding $45 billion.

Prepared by the respected economic and financial analysis firm Global Insight, the report projects that the foreclosure crisis will result in 524,000 fewer jobs being created next year and a potential loss of $6.6 billion in tax revenues in ten states. While the report stops short of forecasting a recession, 128 metro areas will be pushed into a “sluggish” GMP growth of less than 2 percent in 2008. Growth will be cut by more than a third in 65 metro areas and by more than a quarter in 143 metro areas. The largest metro, New York, loses over $10 billion in 2008 economic output as a result of the mortgage crisis, followed by Los Angeles ($8.3 billion), Dallas ($4.0 billion), Washington ($4.0 billion), and Chicago ($3.9 billion).

The Mayoral report says that “homeowners will also see property values decline by $1.2 trillion in 2008.”

So which is it? Gradual recovery or a trillion-dollar fiasco?

Stay tuned.

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