Economist: Housing Damage Is Mostly Done, But that Doesn't Mean Recovery Is Underway
Although the chief economist at Standard & Poor's doesn't see the housing sector reaching bottom for 12 more months or so, he still gave a surprisingly upbeat forecast while keynoting SourceMedia's Mortgage Outlook 2008 Conference here late last month.
"While recovery is still a year away," David Wyss told the meeting, "most of the damage has already been done."
Most of the conference participants seemed relieved by his forecast, but others thought it too optimistic. "Unreasonably uplifting," said Nina Simon, a senior attorney with the AARP, who believes a "huge amount of pain" is still in store for borrowers who were led blithely into loans they could not afford. But Mr. Wyss, who has been the rating agency's chief economist since 1999, pointed out the current downturn isn't much different from previous ones.
The problem, he added, is that most of them have been enjoying an upward swing for so long that they don't remember what a downswing looks like. But he insisted that judging by past housing recessions, this one "is normal." During the 1991-92 downturn, the S&P economist pointed out, housing starts declined by 49%. And this time around, starts have fallen 50%, from an all-time high of 2.1 million annually in 2005.
"This is what a recession looks like," Mr. Wyss told the meeting. "The only thing unique in this" is that housing prices are falling. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/