_Its getting harder and harder to see the road_

[Boston Federal Reserve President Cathy Minehan [MW]](http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BC3A6E113%2D5C56%2D4FB3%2D84DE%2D7F1B075D48C5%7D&dist=newsfinder&siteid=google&keyword=) [said that if housing prices fall [FR]](http://www.bos.frb.org/news/speeches/cem/2006/032006.htm), the impact could be more serious on the economy than generally believed.

Since this speech was held in from the of New England Realtors Conference Monday, I thought it was especially interesting that MarketWatch omitted the presence and comments of David Lereah, the Chief Economist for NAR. [His comments were, as expected, _far_ more optimistic [Boston.com]](http://www.boston.com/news/local/massachusetts/articles/2006/03/20/economists_predict_housing_market_to_bounce_back_in_2007/).

>”The solid fundamentals in our economy will keep the real estate expansion alive,” Lereah told about 250 real estate agents at the New England Realtors Conference.

Real estate expansion?

Perhaps thats why MarketWatch ommitted him from the article when covering this event. He has maintained this _expansion_ argument since early fall. It strikes me as very self-serving. See [Fill In The Blank With The Latest Catchphrase: Housing “Expansion” [Matrix]](http://matrix.millersamuelv2.wpenginepowered.com/?p=230).

With all that being said, its going to get interesting in the second half of 2006. [Consumer confidence is waning [Conference Board]](http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1).

_The decline, which follows four months of gains, suggested to some analysts that [the nation’s economic growth will slow in the year’s second half [Times-Dispatch]](http://www.timesdispatch.com/servlet/Satellite?pagename=RTD%2FMGArticle%2FRTD_BasicArticle&c=MGArticle&cid=1137834839218&path=!business&s=1045855934855). The Conference Board said its Index of Leading Economic Indicators fell 0.2 percent in February, after a revised 0.5 percent rise in January. The January increase had initially been reported at 1.1 percent._

The irony here, is that if the economy weakens (bit not too much) in the second half of 2006 or first half of 2007, mortgage rates could trend downward and actually provide a _boost to the housing market_.

What name do we give that?


2 Comments

  1. Steve March 21, 2006 at 8:49 am

    Hi Jim,
    I think we should call that the “Housing Hedge”
    Your right, Marketwatch antics are typical of what’s happening with today’s stock market publishers. “If they don’t invest in the stock market then no one will read us, let’s bring that real estate market down and get those investment dollars back in stocks.” “Can we do that?” Aren’t we supposed to provide a total unbiased look at the situation?” “Sure kid sure come in to my office and close the door”

  2. Larry Littlefield March 21, 2006 at 3:54 pm

    Those predicting an economic slowdown due to the end of the housing ATM are forgetting the economic damage that high housing prices cause.

    The house poor cannot save, give to charity, or spend on other things. All the money goes to the mortgage. Reports are that for more and more recent first-time buyers in bubble markets, 50% of take home pay goes to the mortgage.

    That mortgage may have been used to provide a big payday to and older homeowner who retired out of the region, taking all that spending power with them. I’m convinced that high debts run up in the 1980s held down consumer spending in the Northeast through the mid-1990s, deepening the regional recession.

    So if housing prices were to drop, say, 40% relative to average income in the next few years (which I believe it will — it certainly should), perhaps fewer people will be able to borrow against home equity and spend it. But more future buyers will have some money left from their paychecks to spend.

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