Although all of the economists agreed that we are in a recession-despite lack of official government confirmation-and have been for many months, several characterized the current financial turmoil as an overreaction, given the country's narrowing trade gap and strengthening dollar. "I'm hopeful that the markets will come to their senses soon," said Michael Moran, chief economist for Daiwa Securities America.
But even if the stock market bounces back, don't expect housing to rally right away. The forecasters pointed out numerous factors that are likely to drag out housing's convalescence: Unemployment is currently at 6.1%, compared with 4.4% last year, and it is projected by some to reach 8% next year. Home prices have already tumbled 20% from their peak three years ago, and will probably sink another 10% before stabilizing. Some 12 million homeowners currently owe more on their mortgages than the houses are worth, meaning more foreclosures and a drop in the already-weakening homeownership rate. And bloated supply will continue to outpace demand in most parts of the country for another year or two.
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good stuff jim