Economist: Dallas-Fort Worth home prices to hold steady despite U.S. decline 1:21 PM CT
01:38 PM CST on Thursday, March 6, 2008
By STEVE BROWN / The Dallas Morning Newsstevebrown@dallasnews.com
Sales and starts of homes across the country should bottom out this year.
But nationwide home prices are likely to keep falling into 2009, predicts economist Mark Zandi with Moody's Economy.com.
"Home prices will ultimately be down 20 percent when it's all said and done," Mr. Zandi said Thursday at a Dallas economics forecast session.
"I think the bottom in housing sales will be sometime this spring and summer," he said.
But that probably won't signal a rebound in housing activity.
"I just mean activity will stop falling," Mr. Zandi said.
Moody's economists continue to see Texas' housing markets holding up well in the current national downturn. Dallas-Fort Worth home prices are forecast to remain relatively flat in Moody's latest estimate.
“The major Texas metropolitan areas stand out as an island of calm,” said Moody's senior managing director Steven Cochrane.
But North Texas' economy still has exposure to the overall housing-sector recession.
Moody's estimates that more than 11 percent of total employment in the D-FW area is housing related.
And more than 8 percent of employment here is in the financial services sector.
"There are some risks in terms of the broader banking industry," said Mr. Cochrane. "That does lend some risks to areas where our outlook is fairly benign.
"Dallas shows up as the one place in Texas."
Even so, Moody's analysts say that the Texas economy - unlike those in California, Nevada, Arizona, Florida and Michigan - is still expanding. And Moody's still predicts moderate employment growth this year in Texas and Dallas-Fort Worth.
"Everything is going well in Texas," said Mr. Cochrane. "But there is no part of the economy not feeling pain - everywhere is slowing down.
"There is no escape - housing markets are beginning to slow, and consumer spending is beginning to slow."
Still, Moody's is forecasting that growth rates across most Texas markets will range from 1 percent to 2 percent this year.
However, the housing market will continue to be a drag on overall economic growth.
"There is some risk in places like Houston, San Antonio and Dallas if things wind up being worse than we expect," Mr. Cochrane said.
Foreclosures are having a big impact on housing values in Dallas and other cities.
And Mr. Zandi sees no slowdown in the wave of home foreclosures hitting many U.S. markets.
"There are increasing indications that the pace that people are going through the process is accelerating," he said. "The homeowners are giving up.
"They expect their negative equity situation to erode further and it makes no sense for them to hold on to the home."
The cause of foreclosures is shifting, he said.
Initially mortgage defaults were coming from disgruntled investors or owners with subprime loans who had seen their mortgage payments bump.
"So far year-to-date, increasingly it’s the negative equity and the job market" that are causing homeowners to default on their mortgages, Mr. Zandi said. "The [mortgage payment] resets are less important."
The closely followed Moody's economist said the national economy is tipping into recession, but he predicts that it will be a short one.
"The economy has been contracting since December," Mr. Zandi said. "We are well on our way to a recession.
"We will begin to recover the second half of this year in part because of the fiscal stimulus and in part because of Fed easing" of interest rates.
But a prolonged period of high gasoline prices - close to $4 a gallon - could derail that turnaround, he said.
"Every penny increase in the cost of a gallon of gasoline is about $1 billion in consumer spending," Mr. Zandi said. "If we from $3 to $4, we will be spending $100 billion more on gasoline.
"That's roughly the size of the tax rebate checks we are going to get."
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