More Positive Predictions

The National Association for Business Economics, or NABE, survey of 48 forecasters predicts the US economy will expand by 3.1% this year, close to November’s prediction that US gross domestic product would rise by 3.2%. The economy is seen growing by 3.1% in 2011.

“We see a healthy expansion under way, although it will take time to reduce economic slack and repair damaged balance sheets,” said NABE President Lynn Reaser, chief economist at Point Loma Nazarene University.

Residential Housing

While home prices have recently risen, as noted by S&P/Case-Shiller, others site three reasons for home prices to head lower: a coming wave of foreclosures, rising interest rates and the eventual end of the tax credits.

There are nearly 5 million houses and condos now delinquent on their mortgages and likely to go through foreclosure in the coming months. This represents more than half of the 7.7 million households now behind on their mortgage. However, John Burns, CEO of John Burns Real Estate Consulting Inc, concludes that there is strong investor demand for these properties, and with continued low interest rates and recovering employment, these sales won’t have much impact on overall home prices.

New Homes

This good news is beginning to resound for homebuilders. D.R. Horton and Beazer both report they are seeing higher numbers of orders together with a lower contract cancellation rate.

Horton reports that last quarter’s orders for new homes were 45 percent above year-ago levels, and a cancellation rate drop from 38 percent to 26 percent.

Mark Toma recently outlined the primary causes in a recent article for www.seekingalpha.com

First, you need a source of fuel to feed the fire;

• Low interest rates infected liquidity into the system;
• This was enhanced by the high savings in Asia and;
• Cash accumulations within oil producing nations plus;
• Leverage from within the financial markets diverted dollars into housing