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Reis economist addresses housing correction.

Disagreement among economic experts when forecasting the health of both the national and apartment industry's economy arises partly because of differences of opinion concerning the housing market correction, according to Sam Chandan Ph.D., Chief Economist & Senior Vice President Reis Inc.

Chandan spoke in mid-January during a panel presentation at National Multi Housing Council's Apartment Strategies meeting in Phoenix.

As for the overall conditions and forecast, Chandan said to take national apartment trends only as context because there is much greater variation in outcomes across metropolitan areas and submarkets now than there was just a year ago.

"There is disagreement among economists about the general trajectory of the economy because we've been getting so much potentially conflicting data-mortgage applications are up, for example, while inventories of homes for sale are growing."

For investors dealing with an improbable baseline of information, Chandan said, "While many economists had expected an increase in long-term mortgage rates to trigger the housing slowdown, single-family and condo markets are cooling while rates have remained low. It comes down to determining where people want to put their money; right now, households are still biased in favor of ownership. The plateau in prices--and, in some cases, price declines--means that some small degree of affordability is being conceded back to buyers."

Chandan forecasted that gains in fundamentals will slow in 2007 as the supply leech from condo conversions reverses and demand for apartments remains muted compared to historical levels.

"The South Florida markets will take the brunt of the slowdown given its large shadow stock of condos-for-rent, re-conversions and the potential for selective repurposing of condo projects that will ultimately come to market as competitive multifamily housing."
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Date:Mar 1, 2007
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