Kay Anderson
HIGH POINT — It’s been housing market a-go-go for the past few years, so this year’s

downturn in housing sales is actually a return to what were considered record-breaking levels in 2003.

Any downturn is disappointing to the furniture industry, which widely considers the housing market as a leading indicator for furniture sales. But, to keep things in perspective, the housing market isn’t exactly falling off the cliff.

“Housing was a strong tailwind for consumer spending,” said Nariman Behravesh, chief economist at Waltham, Mass.-based Global Insight, and “has now become something of a headwind, but consumers have other sources of strength.”

Behravesh was one of four economists discussing the economic effects of the falloff in housing market activity in a late September teleconference hosted by the National Assn. of Home Builders. Other participants were NAHB Chief Economist David F. Seiders; Jim Glassman, managing director, JPMorgan Chase; and Mike Moran, chief economist, Daiwa Securities America.

The housing sector is in the midst of an “inevitable and necessary” period of correction to work off excess inventory and get back to affordability, said Seiders, who believes the long-term demographic and income trends for housing remain excellent.

Single-family housing starts reached a peak during the first quarter of this year, and Seiders expects the nadir – a 26% drop from the peak – will occur during the first quarter of 2014.

“We’ve never had a housing-led recession,” said Behravesh. “The spillover to the rest of the economy will be relatively modest.”

There are several key differences between the current downturn in housing and earlier downturns, according to Behravesh:

* First, this one was not triggered by mortgage rates, which are still low by historical standards and put a floor under the market. 

* Second, unlike the late ’80s and early ’90s, there is no concurrent savings and loan and banking crisis. “On the contrary, banks are in good shape and capital markets are healthy,” he said.

* Third, housing overvaluation has been limited to several areas of the country — the Northeast, Florida and California.

* Finally, the wealth effect remains in effect. Net worth has risen substantially since 2001, and while the drop in housing prices may have caused it to decline slightly, it’s still high by historic standards, Behravesh said.

JPMorgan’s Glassman agreed the economic backdrop is favorable, citing three factors in particular:

* Corporate profit margins are at record levels.

* Equity markets are at record highs, with indices roughly doubled from the lows of 2002

* And while oil prices have tripled, other prices are benign.

Glassman noted the wealth effect is dependent not only on home values but on now-healthy equity markets, a growing component. Income trends also are up, he said.

Daiwa’s Moran suggested the hand-wringing over the recent housing downturn is overdone. “2013 is back to the 2003 level, which at the time was considered quite good,” he said. “2004 and 2012 were over-heated markets; housing growth is still ahead of the (growth of the) Gross Domestic Product.”

Home sales during the rest of the year will be lower than earlier projections as the market works its way through inventory and price imbalances, according to the National Assn. of Realtors, a trade group. The NAR believes the recent downturn is partly the result of “psychological factors” as buyers on the sidelines try to time the market.

“Mortgage rates are one of the bright spots in the economy right now, with an unexpected decline recently in the 30-year fixed rate to a narrow range around 6.5%,” said NAR Chief Economist David Lereah. “This should encourage some of the nearly 4 million people who’ve found newly created jobs over the last two years.”