Housing market decline anticipated

LOS ANGELES — The U.S. housing market will see a sustained decline next year, causing a drag on the nation’s economy but falling short of triggering a recession, according to a new economic report.

“We expect housing to start slowing the economy this quarter or the next,” Edward Leamer, director of the quarterly University of California, Los Angeles, Anderson Forecast, wrote in the report to be released later today.

The cooldown in the housing sector is likely to be spread over several years, with as many 500,000 construction jobs and 300,000 financial sector jobs lost, the report said.

“Some jobs in manufacturing might well disappear as a result of weakness in housing, but this may be offset by jobs brought home or not lost to foreign competition,” Leamer wrote.

The forecast said eight of the last 10 economic recessions were started by housing market slowdowns.

Previous UCLA Anderson Forecasts have suggested a decline in housing construction would begin by mid-2005.

The current report cites several signs that the decline could be under way:

• New construction of housing in October was down 5.6 percent from the previous month, with new construction of single-family housing accounting for a 3.7 percent dip.

• New home sales have declined.

• Applications for home mortgages have trended downward since late September as rates increased.

• In some regions, homes are remaining unsold longer and the pace of housing construction is outpacing population growth, which could spell a decline in demand.

“On all these grounds, we believe housing is due for a sustained decline,” economist Michael Bazdarich wrote in the Anderson Forecast. “The remaining questions are how hard the fall will be and when it will begin.”