NAHB: Housing Market Activity Should Stabilize by Mid-2007

The housing downswing still has some distance to go, if only to work off excess supply in markets for both new and existing homes, according to the National Association of Home Builders.

Builders are doing their part by cutting back on starts of new units, by trimming prices and by offering sizeable non-price sales incentives to limit cancellations and bolster sales. Furthermore, various economic and financial market fundamentals figure to be supportive of housing demand for the foreseeable future, helping to facilitate the inventory correction.

As long as the economy remains in good shape, interest rates remain close to current levels, energy prices remain below recent highs and sellers of new and existing homes adjust prices or offer incentives to meet current market realities, the rest of the housing market correction should be of limited depth and duration, the NAHB says.

It’s likely that the bulk of the downswing in home sales and housing production will occur this year, with market activity stabilizing during 2007 and moving back up toward trend in 2008, the organization adds. The cumulative below-trend levels of housing market activity it projects roughly offset the above-trend performances in 2004-2005.