Following a period of economic growth, analysts at a global research firm are predicting an economic slowdown in 2007 in much of the U.S. if the current slump in home sales continues.
The impact, however, would be much less on both coasts, including the Bay Area, where housing prices remain strong despite a recent softness in overall sales.
And, it the forecast could change if home mortgage interest rates hold steady or continue to drop, as buyers have seen in recent weeks.
The new report by UBS Wealth Management Research, a global financial firm, addressed worldwide prospects, with its analysts expecting slower U.S. growth than most other economic forecasters.
“While the world’s other major economies will be affected by slower growth in the U.S., their own domestic demand should continue to drive global growth overall,” the UBS Global Outlook report stated.
The report pointed out that annualized quarterly growth in residential investment in the third quarter dropped to 17.4 percent in the U.S. The forecast call for growth of 2 percent for the next few quarters.
Tri-Valley Realtors believe, however, that the market here will do much better. At recent meetings of the Valley Marketing Association, a Realtors group, they have reported that a correction in the real estate market has already materialized with little or no impact to the local economy.
Dave Walden, a Certified Mortgage Planning Specialist in Pleasanton, said forecasters are awaiting today’s Jobs Report before firming up their predictions for interest rates and the housing market in 2007.
“Economists are looking for the formation of 115,000 new jobs and hourly earnings to increase by 0.3 percent for the month of November,” he said.
“On a technical level, bonds have been on a nice strong trend higher since the end of June, meaning home loan rates have moved much lower,” Walden added. “Remember, that a bond prices go higher or improve, home loan rates, which are hand-in-hand with bonds, go lower and improve.”
“But if the Jobs Report today is a real stinker and shows very weak employment, this would be good for bonds and home loan rates, and we could see more improvement, moving closer to and perhaps breaking those past historic levels,” he explained. “On the contrary if the report is strong, bonds may well begin a retreat and home loan rates could worsen slightly.”
In its research report, UBS predicts that the Fed will cut the federal funds rate over the next few quarters, for a total 1.25 percentage point reduction to 4 percent by the close of 2007. According to UBS, that could cushion the flagging economy it forecasts for the U.S. and renew momentum “in good time.”
