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July 13, 2007

Is the housing market firm?

Economists agree that the softness in the national housing market was a big reason the economy was slow in the first part of the year. Although it's too soon to say for sure, a number of encouraging signals indicate that the housing market may finally pick up. N.C. State University economist Mike Walden explains.

"Mortgage applications, which were falling, have stopped falling. They are now on their way up," says Dr. Walden, a professor of agricultural and resource economics. "The subprime market problem -– the subprime housing market is the market that had borrowing going to very low-income, high-risk folks with some defaults there, a lot of defaults -- ... doesn't seem to have bled over into the larger market. And lenders have not significantly tightened standards as a result. So that's a good sign.

"But perhaps most important of all," Walden adds, "unsold inventories of homes are dropping. Now this is very important because you need to have those inventories reduced in order to encourage builders to come back and build more homes.

"So we can say that the fundamentals of the housing market appear to be going right now in the right direction," he concludes. "And if that continues, those fundamentals continue to move in the right direction, that should put the housing market back on the growth track."

Posted by deeshore at July 13, 2007 08:00 AM