What do a housing economist, an investment analyst, and a home builder all have in common?

They all agree the housing market is weaker than it seems. But they’re divided on how bad it really is and what can be done to improve it.

Emile Haddad is the Chief Investment Officer of Lennar Home Builders. The company, which was founded in 1954 and is headquartered in Miami, has about $10 billion in sales (give or take a house). Emile says the company has written down optioned property, sold others, and is trying to sell homes. They are offering some discounts and incentives. He believes (wrongly, I think) that the media has played a role in making the housing downturn worse than it might have otherwise been.

“If you would all just write a story that we have hit the bottom, things would improve,” he told a gathering of 150 top business editors and writers at the recent Society of American Business Editors and Writers conference in Anaheim. (He got a few chuckles.)

Amy Crews Cutts is the deputy chief economist for Freddie Mac. She says that we’re in a place we’ve never been before with regard to the fallout from the subprime lending mess.

“The prime mortgage market will be absolutely boring,” she told attendees at the same conference.

“We expect delinquencies in prime fixed-rate mortgages to be about level as economic growth sustains increases in employment and incomes. Adjustable rate mortgage resets are likely to raise prime ARM delinquency rates a bit, however resets donâ’t start in earnest until 2008,” she added.

The problem is with the subprime market and payment option loans, which became very popular in 2003. These loans haven’t really reset yet, but already there are repayment problems very early on.

“People can’t afford these loans right now,” she said. And because certain pieces of useful information aren’t available, no one really knows who has these loans and what’s going to happen when they do reset. “Clearly, foreclosures and delinquencies will rise.”

“There are $1 trillion in ARMs that will reset in the next year, and those people are going to have trouble refinancing or keeping their homes,” predicted Mark Keisel, executive vice president with PIMCO. “We’ve never before had mortgage debt grow faster than the GDP in 10 years. You can make a good case that the economy has been supported by mortgages.”

Keisel is worried about the number of permits being pulled (down 28 percent from last year) which means fewer jobs, which means the economy will be slowing and job growth will be slowing as well.

“If you don’t have a job, you’re not buying a house,” he said.

But Keisel has a job and isn’t buying a house. “I probably won’t buy for another year or two.”

May 23, 2007.