RBC comments on US Housing market “” No relief

Housing market “” No relief

The U.S. housing market recession continues in full swing, with home sales
running at least 20% slower than a year earlier, prices posting significant yearover-
year declines and the stock of homes for sale holding well above historical
norms. Residential investment fell at a 24.6% annual rate in the first quarter after
plummeting 25.2% in the fourth quarter of 2007 and subtracted a sizeable 1.1 percentage points from economic growth in the first quarter of 2008.

Foreclosures
were up in April and delinquencies are continuing to rise. Our forecast
assumes that the recession in this sector will continue through 2008. In 2009, the
combination of lower interest rates and lower house prices is expected to reduce
the inventory of homes for sale to more normal levels, which should put a floor
beneath new home construction after three years of significant declines.

Mark

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