Housing Drags on Economy, May Curb Inflation

Wall Street Journal (04/17/08) P. A3; Reddy, Sudeep
Federal Reserve Bank of San Francisco President Janet Yellen believes the housing downturn will put a damper on economic growth until next year, noting that consumers must contend with home-price declines, drops in the stock market, rising food and energy prices, increased unemployment and the credit crunch. More weakness is expected in the housing market, with the Commerce Department reporting a 36.5-percent decline in housing starts to an annual rate of 947,000 and a 5.8-percent drop in building permits to 927,000 during the year-over-year period ended in March. However, experts believe starts will continue to fall to a level necessary to ensure that new-home inventory is depleted; New York University economist and Roubini Global Economics Chairman Nouriel Roubini predicts starts ultimately will slip to 700,000. "We're still in the first few innings [of a recession]. The next 12 to 18 months are going to be painful," he notes.