NABE Sees Recovery from Foreclosed Homes List Inventories

by William Dover on May 28, 2009

The nation’s economy will start to recover from the effects of foreclosed home list inventories in the next several months of 2009, according to a survey of 45 economists who are members of the National Association for Business Economics.

The economists described the recovery as moderate, which is typical after a severe economic downturn and overwhelming volumes of foreclosed home list inventories. They expect the recession to go away in the next several months.

Chris Varvares, president of NABE, said many economists are expecting economic growth in the next several months because of a slowdown in job cuts. They also see a growth in employment in 2010.

Nearly 3 out of 4 economists interviewed said they expect the recession to end by September. But 19 percent contended that a turnaround will only start by the last months of the year and 7 percent said recovery will start in the early months of next year.

None of the economists interviewed believed that the recession will continue beyond March next year.

The NABE report also predicted a 1.8-percent decrease in GDP in this year’s second quarter, a decline of 3.7 percent from last year’s second quarter, the biggest decline since the 1957-1958 drop.
The economists have predicted a real GDP growth of 1.2 percent in this year’s second half.

In terms of jobs, the economists predicted a 4.5-million total job loss in 2009, pushing up the jobless rate to 9.8 percent. They said that the jobless rate will drop to 9.3 percent by the end of 2009.

About 72 percent of NABE panelists expect sales of new homes, existing homes and foreclosed home list properties to bottom out in the next few months. Over 60 percent said home starts would also reach their bottom levels in the same period.

The economists are split concerning the bottoming out of home prices. Thirty percent said it would occur by September, another 30 percent said by December and the remaining 40 percent said price declines would continue into next year. The median forecast is that housing prices would increase by 1 percent in 2010.

Consumer spending declined due to job losses and reduced income. The economists said many consumers became thrifty because of fears of unemployment and the continued rise in foreclosed home list inventories.

Additionally, over 70 percent of the economists interviewed said that the frugal behavior of consumers will last during the next 5 years because of the pain they suffered from the effects of foreclosed home list inventories.

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