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UCLA Anderson Forecast: Boom Isn’t Over But Housing Industry Has Weaknesses

The UCLA Anderson Forecast was released today [USAToday]. [1] “The widely respected forecasting center at UCLA said rising interest rates, slowing population growth, overbuilding and the fact that prices had reached bubble-like heights in some hot areas will drive the decline. Housing, which had been a big driver of growth, is contributing little to the economic expansion at present, the forecast said.”

“A year ago, UCLA’s respected Anderson Forecast declared the housing market a bubble and identified the prospect of a sharp housing-market downturn as the biggest risk to the U.S. economy….says the boom isn’t even over [WSJ]. [2]

The UCLA Anderson Forecast [3] correctly predicted the 2001 recession.

The pushed back their original prediction that the US housing industry would experience a slow down beginning in mid-2005. They changed their estimate to early 2006.

The slowdown is likely to last several years, with as many as 500,000 construction jobs and 300,000 financial sector positions lost [AP]. [4]

The forecast said eight of the last 10 economic recessions were started by housing market slowdowns. Though the coming cooldown will cause a drag on the nation’s economy, it will fall short of triggering a recession, the forecast said.

“The report cited several signs that the decline could be under way:

This is consistent with I think most people’s expectations. The volume of new development has been growing over the past several years and has finally hit a saturation point.