crystal ball

Mark M. Zandi, Ph.D., an economist and co-founder of Moody's, mapped out the probable road ahead at a National Association of Home Builders construction forecast conference last fall. The upshot? The worst is almost over. Although the housing market will continue to decline over the next six months, a bottom is in sight.

He cautions, however, that the recovery will depend on how quickly builders can rein in construction and how quickly homes become affordable. That caveat includes the expectation that the economy will continue to grow, and that there will be no further interest rate increases throughout 2007. Even a small rise, he believes, would be hard for the market to bear.

Zandi wrote of another scary possibility in “Housing from Boom to Bust,” a Moody's paper published last August. “The housing correction threatens to unravel into a crash if the job market does not hold up as well as expected,” he reports. “Given that housing-related industries now account for such a large share of jobs and an even larger share of job growth, this is a measurable risk.”