Housing: Half Empty Or Half Full

Homebuilders are warning about earnings, home sales and prices are falling and defaults and foreclosures are soaring.

But Jim Gillespie, President & CEO of Coldwell Banker, remains optimistic.

“I would say that the last ten years were a little unusual in that we had ten great years in a row," Gillespie told CNBC. "Usually, you go five, six or seven years and then cycle down for a year or two before picking up again. Real estate has been a solid investment – a consistent winner in terms of appreciation.” Adds Gillespie: "I think the long-term outlook for real estate is solid.”

Yes, the long term.

In the meantime, listen to Lennar CEO Stuart Miller on why the company lowered guidance for full-year 2007.

"While some markets are performing better than others, the typically stronger spring selling season has not yet materialized," Miller said in a statement. "These soft market conditions have been exacerbated by the well-publicized problems in the subprime lending market."

Lennar's first-quarter profit tumbled 73%. Net income for the quarter ended Feb. 28 fell to $68.6 million, or 43 cents a share, from $258.1 million, or $1.58 a share, in the year-ago period. The results, however, were in line with expectations of analysts polled by Thomson Financial.

Miller and Gillespie's comments Tuesday followed back-to-back downbeat reports. On Monday, the government said new home sales fell to a near seven-year low in February. (Complete data)

On Tuesday, data showed U.S. single-family home prices plunged in January, posting their first year-over-year drop in more than a decade, according to Standard & Poor's/Case-Shiller Home Price Index. (Full report)

Robert Shiller, a professor of economics at the Yale School of Management's Int'l Center says thouigh there are signs the market is bottoming out, the market is more likely to continue down for awhile.

Doom and gloom are not unusual in the cyclical housing market -- they're just more powerful after a decade of red-hot prices.

So Gillespie may have been thinking big picture in brushing aside suggestions that the current real estate market is the worst ever, recalling that interest rates hit 21% 25 years ago.

“You’ve got demographics that are overwhelming,” he says. “There are 78 million baby boomers, their kids and minority home ownership has grown to about 50% from 40% in the last ten years. Interest rates are near historic lows, unemployment is under 5% and, overall, the economy is good."

Gillespie says he expects sales this year to rank as the third, fourth or fifth best in history. Coldwell Banker is part of Realogy, whose holdings also include Century 21 Real Estate.