Wednesday, May 19, 2010

Feldstein Says Falling Permits May Signal U.S. Housing Slump

A decline in U.S. homebuilding permits last month may indicate a renewed housing slump as demand weakens after the expiration of tax credits, Harvard University economics professor Martin Feldstein said.

“Permits are an indication of what is going to happen in the future,” Feldstein said in a Bloomberg Television interview. “With the first-time home-buyer credit behind us, we are not going to see the strength of housing demand we have in the last few months as people rushed to take advantage of that program.”

Feldstein, a former president of the National Bureau of Economic Research, said the potential for another decline in housing and less monetary stimulus from the Federal Reserve cast doubt on whether the U.S. has fully emerged from a recession that began in December 2007.

“I hope the recession is behind us,” he said, reiterating his warning from January that U.S. growth may falter this year because of waning stimulus from federal spending and tax incentives for purchases of homes and autos. “There is still uncertainty about the future pace of demand now that the government programs and the Fed programs aren’t there to support it.”

Nothing terribly insightful here from Feldstein, but it does point out that he is one of the few mainstream economists that actually knows what is going on.

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