Outlook 07

Don’t Fear Oil, Housing Prices: Economist

by cnbc.com staff

Nariman Behravesh says the U.S. housing market is uneven and builders are wary of static inventory levels -- but with the demand side “coming back,” the chief economist for Global Insight maintains that “the worst seems to be over.”

Ironically, Behravesh tells CNBC’s Rebecca Jarvis that real-estate gains or losses won’t have a strong impact on the American economy either way. He says housing is not as big a contributor to overall growth as is popularly imagined, and will have little effect on the “growing but sluggish” economy he foresees for 2007.

Economic Predictions for '07

Behravesh also counsels calm about oil prices, which he expects to hover in the $60- to $65-per barrel range. He declares that energy is “less important” a factor than it was “20, 25 years ago.” 

The strategist takes on the Federal Reserve, calling another interest rate hike “unlikely” – and sees a “pretty good chance” that the Fed will cut rates in the “late spring, early summer.” And talk of the U.S. going into a recessionary spiral is “completely off the mark,” he declares.

Behravesh predicts one factor will shape America’s pocketbook, for the better -- a sliding greenback and simultaneously strengthening euro. The latter currency is currently worth $1.32, but he sees the euro rising to $1.40 to $1.45 by the end of 2007 – a boon for such U.S. exporters as Boeing and the Big Three automakers.

Dollar's Loss, Their Gain