Downward revisions to gross domestic product estimates last month showing an even weaker first quarter than previously reported led NAHB and other observers to lower projections for economic growth over the balance of 2011.
Combined with congressional gridlock over the debt ceiling and renewed fears over Europe’s debt crisis, this shook confidence and culminated in some highly volatile day-to-day swings in equity markets as they contemplated an uncertain near-term economic outlook.
Standard and Poor’s credit ratings downgrade of U.S. debt has added to the uncertainty, but demand for U.S. Treasury bonds emerged unscathed, and the U.S. was actually paying lower interest on its debt as the result of a “flight to quality” among investors rattled by the stock market.
The Federal Reserve Board of Governors reacted to the recent turn of events with an explicit commitment to maintain the federal funds interest rate at very low levels until at least mid-2013. This confirmed a timeline that many analysts had already factored into their forecasts and it should help support housing demand stemming from a healing labor market.
Despite worrisome economic and financial news, the housing market has remained steady, although at very low levels.
The NAHB Housing Market Index was unchanged in August, with builder confidence languishing at roughly the same low level for the past nine months. Housing starts continue to bounce along the bottom, with a slight decline in July on the heels of a marked increase in June.