A gloomy outlook.

Author:Hewitt, Janet Reilley
Position:Portfolio
 
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The news about the coming year is not that cheery. In fact, it looks like there will be more tough sledding ahead for most of the way through 2008. And some economists are now giving it even odds we could slip into recession. There is one bright spot, though--it's the surge in net exports. But even that bright spot comes with a negative--a weak dollar. But I guess one bright spot is better than no bright spots at all.

The news surrounding this downturn in the real estate finance business has been relentlessly negative. Not a day goes by when there isn't a foreclosure-crisis or a subprime-meltdown story in the press. Yet the economy and many indicators remain in decent shape. Job growth continues (albeit at a slower pace), inflation seems contained, interest rates aren't bad (unless you are looking for subprime mortgage money) and there is growth in the export sector. So shouldn't this thread of more upbeat economic news start to register on the nation's psyche?

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For example, there has to be a point when it dawns on the market that there are some fantastic buys in many of the nation's prime housing markets. Why wait for the absolute floor on prices, when the selection in some great neighborhoods is really good right now? When will homebuyer psychology turn? I guess that is the $64,000 question. And the answer is: probably not until the very end of this year and into 2009, according to industry economists.

Our cover article this month titled "Tough Outlook for the Economy" lays out what the industry can expect in terms of interest rates, economic growth and mortgage market activity in 2008. The article, written by Doug Duncan, chief economist for the...

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