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Economists Tamp Down Housing Expectations

A slower than anticipated first half has killed off any enthusiasm economists had for housing at the start of 2014, a survey published by the Wall Street Journal [1] finds.

In the Journal's latest monthly survey, a panel of economic experts called for new housing starts to average a seasonally adjusted annual rate of 1.01 million this year, a 9 percent decline from their prediction at the beginning of the year, before lackluster housing and economic data stunned forecasters.

As of June, housing starts have averaged a rate of nearly 953,000 for each month of 2014, according to Census data. Homebuilding has cross the million mark in only one month so far, reaching a rate of 1.06 million in April.

While weather conditions may be to blame for some of the slowdown earlier in the year, weakness in new home sales—which haven't yet climbed above an annual rate of 500,000—has also been a problem.

Given the way the market has performed in the year's first half, 20.6 percent of economists in the Journal survey now say housing could be a downside risk to economic growth, more than quadrupling from January.

In a separate report [2], the Wall Street Journal also revealed that most of the economists surveyed don't expect the Federal Reserve to start raising interest until next summer, despite grown in the job market and an apparent turnaround in GDP.

In all of their meetings this year, leaders at the Fed have voted to continue cutting down the central bank's monthly asset purchases, creating an expectation that the program will stop by the end of this year. However, the committee has been careful not to set a definite timeline either for its tapering plans or for possible rate increases.