Analysts questioned by CNBC seem to discredit the November housing starts number released today. The report showed an increase of 1.58 million units, or 6.7% – a sharp difference from the 13.7% decline in October. Commerce Bank Chief Economist Joel Naroff gave the report a resounding pshaw on “Morning Call.” Don’t expect a real turnaround in the sector until at least early 2008, he says.
Both buyers and sellers are still in denial, Narloff says. Sellers don’t want to drop prices, and buyers won’t admit that prices are about as low as they’re going to get. Inventories are double what’s needed in the market as well. It will take some time before inventories are in a position to demand price appreciation.
Steve Ricchiuto is chief U.S. economist at ABN AMRO. He predicts the 21% decline in residential investment on a compounded annual basis last quarter will continue into this quarter and the next. He sees the rate of decay slowing deeper into 2007. Next spring will be a “very important barometer,” he says, to gauge whether the housing market has further to fall before hitting bottom.
So what’s this mean for the U.S. economy on the whole for 2007? Nothing, according to Ricchiuto. He says we would have noticed by now any major cracks in the economy caused by housing.