Housing Market Slower But No Recession Coming

Housing Market Slower but No Recession Coming

 

Housing activity has slowed from recent years but the dragdown should not lead to a recession, mortgage finance company Freddie Mac said in its monthly economic outlook. "Any risks the housing contraction could spark an economy-wide recession are fading fast. After subtracting 1.2 percentage points from GDP growth in the third and fourth quarters of 2006, the drag from further declines in construction spending should peter out toward mid year," it said.

 

Freddie Mac said inventories of new homes are higher than reported due to cancellations of sales contracts. Inventory buildup is also understated due to homeowner vacancies of condos, it said. "Housing activity is stabilizing at levels well below recent years," it said.

 

The gap between supply and demand may not be sufficiently narrowed until late 2007 as home prices will likely remain on the higher end, the housing finance giant said.

 

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