Ian Shepherdson
Ian Shepherdson
Ian Shepherdson is an award-winning British economist. He is the founder and Chief Economist of Pantheon Macroeconomics, an economic research firm located in Newcastle, England, with an office in White Plains, New York. In February 2015, he was named The Wall Street Journal's US economic forecaster of the year for the second time, having previously won the award in 2003...
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Our view is that home sales will slide through the summer, dragging housing starts down into the fall. But this is still no more than a forecast; mortgage applications are still very strong.
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Over the next few months we expect starts to strengthen as reconstruction begins on the Gulf Coast - the rise in permits may be an early sign - but elsewhere starts still need to lag sales. Demand is still huge but there are too many new homes for sale.
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Doubtless these numbers will be followed by a rash of commentary to the effect that rumors of the death of the housing market are greatly exaggerated. This would be the wrong conclusion to draw. It is not possible for sales to trend down and starts to trend up.
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One steep drop in housing starts does not make a downward trend, especially in a month which was very wet in the West and very cold in the Northeast. Still, the data are consistent with other signs of a softening housing market, most notably the drop in homebuilders' confidence. What really matters, though, is whether sales will fall fast enough to turn a softening into a collapse.
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No doubt these numbers will be taken by the market as a clear sign of a softening housing market and, by implication, an indication that higher interest rates are biting. We are much more skeptical: housing starts lag home sales, which have been depressed in recent months more by lack of inventory than by higher interest rates.
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We think there is a good chance that home sales recover, or at worst stabilize, over the next few months. The starts data are potentially seriously misleading.
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By early next year we expect starts to have begun to decline, though activity can probably remain close to current levels for another couple of months,
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We remain relatively optimistic about the housing market, but we do accept that activity fell sharply in the immediate aftermath of Sept. 11,
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We remain of the view that the Fed's near-term objective is simply to support the stock market until consumer and business sentiment improves,
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We have no real idea what the number next week will be, but we can be pretty sure that for the next few weeks the data will tell us next to nothing about the state of the economy across the country outside the areas hit by the storm.
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There are currently more than a million displaced people, and I don't expect many of them to be back at work by the time of the September payroll survey.
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With three sub-300,000 numbers in the past four weeks, it is beginning to look as though there has been some real improvement in the labor markets this year.
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With unemployment set to breach 6 percent over the next few months, people's view of the current economy is bound to deteriorate, ... But expectations are what matter for spending, and at this level the numbers suggest consumers spending will rise, albeit not rapidly.
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There is certainly nothing in this report to suggest any serious slowing, or any slowing at all, in the economy is near.