NAFCU Sees Housing Slump, Other Issues Continuing to Drag Economy

ARLINGTON, Va. – Although recently released stats for the second quarter revealed some real strength in the economy, NAFCU Economist Tun Wai suggested the troubled housing and financial markets still are taking a toll. “The final second quarter GDP figure indicates a strong pace of economic activity, but problems with housing and financial markets may make third quarter GDP growth much slower,” Wai said. “Consumer spending, which has helped the economy in the past, slowed significantly during the second quarter (1.4% annualized compared to 3.7% in the first quarter), and consumer expectations have been down for most of the third quarter.” That jibes with the 4.3% decline in existing home sales for August–¬the sixth straight month of decline, he noted. With the notable exception of the Midwest, which posted a 3.5% increase, the median home price in August fell everywhere else. “NAFCU expects the median home price to gradually rise by year end,” Wai said, with existing home sales forecast to be six-million units, down from 6.48 million in 2006. The pace of new home sales fell more than expected in August, he reported, noting the 8% drop in median new home prices is the largest decrease in 37 years. “NAFCU projects that new home sales will decline from the 1.06-million-unit pace last year to 880,000 annualized units in 2007,” Wai said. NAFCU is expecting another Fed rate cut before the end of the year.