Is the Housing Market on the Mend?

The consensus seems to be that its so bad, we must have hit bottom. But "a drop in housing starts might actually be good news," says one economist.
May 24, 2009, 1pm PDT | Tim Halbur
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"A drop in construction activity is certainly troubling for the overall economy and for unemployment trends. But a drop in housing starts might actually be good news for the sector's eventual rebound, says Gary Wolfer, chief economist at Univest Wealth Management (UVSP).

One of the housing market's main problems is a glut of supply-too many homes for sale. Idle homebuilders mean fewer new homes coming onto the market, thus hastening a bottom for the market. "We're getting there in a brutal fashion," Wolfer says, but at least we're "in the process of bottoming out."

Keith Hembre, chief economist at First American Funds, worries that further home foreclosures could continue to drive the proliferation of "for sale" signs across the country.

However, he does see reasons to hope for a revival in demand. The government is helping: Low interest rates make mortgages more easily affordable (if you can qualify for one) and the federal government is providing an $8,000 tax credit in 2009 for first-time home buyers. "The signs are there that demand has generally hit bottom," Hembre says-and it may even be improving somewhat."

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Published on Friday, May 22, 2009 in Business Week
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