Washington, DC — The deepening downturn in the U.S. housing markets has significantly eroded consumer sentiment, pushing the economy into a mild recession. So says David Seiders, chief economist for the National Association of Home Builders (NAHB).

“The worse-than-anticipated housing downturn, combined with systematic weakening of the labor market and rapidly rising energy and food prices, has taken a heavy toll on American consumers," said Seiders. “It's now clear that we have entered what we anticipate will be a mild recession, running through the first half of this year, and there are substantial downside risks to this economic scenario.”

To prevent a longer and deeper decline, Seiders said Congress ought to take immediate steps to stimulate the economy via actions specifically targeted at improving the ailing housing market. These include a temporary home buyer tax credit, modernization of the Federal Housing Administration (FHA) and oversight reform for the housing-related government-sponsored enterprises (GSEs).

“Stopping the downward trend in housing prices is important to bolstering consumer confidence and mortgage credit quality, and a temporary home buyer tax credit is the best way to do that,” Seiders noted.

Given the continuing erosion in housing finance markets and buyer demand, Seiders has adjusted NAHB's official housing forecast to indicate continuing downward movement in housing starts through the end of 2008, bringing the decline for the year to 30%. A month ago, Seiders expected housing starts to bottom out in the third quarter, with a 27%decline for 2008.
“This change in our forecast indicates that, barring immediate action by Congress to stimulate housing and the economy, the housing sector will continue to be a serious drag on economic growth until the beginning of 2009,” Seiders said.

“Stimulus bills recently passed in the Senate and the House Ways and Means Committee are welcome steps in the right direction. This is one instance where prompt and appropriate efforts by U.S. lawmakers could make a significant difference in limiting the depth and duration of the economic downturn,” he added.

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