Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

I certainly would not say that. [Laughter] I am glad to hear that the builders you talked to are not giving clear answers to that question because we have been talking to them as well and have not received clear answers. I think this is an open and unresolved question of the forecast. We are predicating our forecast or gauging it basically on an expectation that, in fact, builders would try to drive months’ supply back close to where it was on average over the past ten years, as if that had persisted long enough to reflect their desired equilibrium. But that is a big “if,” and as you note, if one wanted to take a twenty-year or thirty-year average, that desired months’ supply figure would be higher. So an upside risk to housing would be that there is not as big an overhang to be worked off as we are currently gauging in this forecast.

On the sales of existing homes, I guess we, too, have taken some comfort from the fact that they stabilized a bit. More recently there was a dropback in existing-home sales and a decline in the index of pending home sales, which has some predictive content for existing homes going forward. So the picture is a little murkier, but I do think those data might suggest that, although it looks like a complete free fall in new-home sales, you need to factor in the possibility that overall housing demand is not quite as weak as those figures for new-home sales.

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