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Housing Trends • The Economy • Business Travel

Housing Trends: The slump is bottoming out.
The Economy: Inflation is cooling its jets.
Business Travel: Airline ground delays a thing of the past?.

Housing Trends
This year will mark a shift in housing:
The current slump will find its floor. After that...a barely perceptible upward trend in the volume of home sales and construction, as well as in the median purchase price.

Spring is going to offer a preview of recovery as the peak selling season for houses shows more bounce than last year's. Property agents see buying interest rebounding even in areas that have been knocked flat.
But real improvement will come later and won’t be fully evident until next year.

Home builders still need to slow output to fully offset the excesses of the boom years. The new-home supply backlog...about 5.9 months of sales...is down from 7.2 months in July but above the pre-boom average of 4-5 months.
Cuts will be mainly in the first half, but they'll make the entire year look weaker.
We see starts declining 18% this year to 1.47 million, after last year's 13% slide.

Total home sales...both existing and new...will fall about 8.5% to 6.9 million, marking the slowest pace of house purchases since 2002.
Median prices are likely to slip a bit after a tiny gain in 2006.
Next year...a small rise for both sales and prices is likely.

Limiting demand growth: Retrenchment in the mortgage industry.
Lenders went hog wild in late 2005 and 2006, easing requirements on loans to qualify risky borrowers and keep up a brisk pace of business.
But now they're tightening borrowing requirements substantially in the face of rising delinquencies and foreclosures plus heavy pressure from bank regulators. At-risk buyers will be frozen out of the market.

Investment-led demand is down sharply. It was the driver for approximately a quarter of house purchases during 2004 and 2005.
Even so, demand has solid fundamental support:
Reasonable home mortgage rates are a lure. Look for the 30-year fixed rate to reach 6.5% by year end, slightly above the current 6.2%.
The job market is strong, boosting confidence among consumers and sustaining wage gains.
And population increases aren’t slowing down. More households mean more homes are needed.

The economy
Housing's drag on economic growth will lessen by midyear or so, after shaving a percentage point and a half from January-June growth. Rising home foreclosures aren't a big threat to consumer spending, which is largely fueling economic growth. Though foreclosures are poised to rocket to about 1.5 million this year, nearly double two years ago, they'll still affect only about 3% of holders of outstanding mortgages.
Foreclosures will be concentrated in just a few areas:
Ohio, Michigan, and Indiana, as a result of cutbacks by U.S. auto companies, as well as Colorado, Georgia, and Nevada, where overbuilding was most rampant.
The economy still has plenty going for it on several fronts, notably from robust export markets and a booming domestic service sector.

January’s inflation numbers aren’t as worrisome as they appear. The 0.3% rise in core inflation, although higher than expected, was 0.256% before rounding. And sharp increases in costs of medical care and retail items aren’t likely to continue in subsequent months. The same goes for food costs, which jumped because of the freeze in California.
But the Federal Reserve is sure to take the increase seriously. Fed Chief Ben Bernanke and fellow policymakers will keep issuing warnings that they’ll hike interest rates if inflation doesn’t cool enough.

Business travel
Cross endless airplane ground delays off your list of worries.
Airlines will make sure they don’t happen again anytime soon in the wake of horror stories involving passengers on JetBlue planes.
New industry policies promise faster deplaning of passengers if they face long delays while waiting to take off or to access a gate. American Airlines won’t keep passengers waiting on a plane on the tarmac for more than four hours. Other airlines will adopt similar limits.
JetBlue is promising to pay all passengers affected by disruptions. Competitors will resist, fearing too big a hit to their bottom lines.
Congress will read carriers the riot act in upcoming hearings.
But lawmakers won’t pass an airline passenger bill of rights as long as airlines follow through on their vows to clean up their act.

Negotiating airport security lines is about to become easier:
The Registered Traveler program is coming to more airports. Providing biometric and biographical information to an approved RT vendor will let passengers breeze through security. Moreover, RT cardholders
can expect deals on airport parking plus other travel-related discounts.
So far, five vendors are licensed to issue RT cards to travelers: Verified Identity Pass, Saflink, Unisys, Verant Identification Systems, and Vigilant Solutions have the Transportation Security Administration’s OK.
Among cities with expedited service: Cincinnati, Indianapolis, Orlando,and San Jose, Calif. Also, Reno, Newark, and New York City JFK Airport) will add it in March. Others are sure to follow.

No airport user fees will be levied on business and personal jets as the White House has proposed in a bid to boost funds for the FAA...Federal Aviation Administration. Lawmakers on Capitol Hill will scotch the plan.