Outlook 07

Don’t Fear Oil, Housing Prices: Economist

by cnbc.com staff
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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.

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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.

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