With Christmas dinner still a pleasant memory, it's a good time to digest some observations about the residential real estate, courtesy of David Seiders, chief economist of the National Association of Home Builders.

According to Seiders, the housing sector continues to stand out above a generally murky U.S. economic picture.

The housing production component of GDP (residential fixed investment) made another positive contribution to economic growth in the third quarter, despite modest slippage in the multifamily sector, Seiders says. "Furthermore, recent data point toward ongoing gains in the single-family market, partly at the expense of the rental market," according to the chief economist. "Single-family construction put-in-place rose at an annual rate of 5.2 percent in October, and total home sales for the month -- new and existing combined -- surged to a near-record annual rate of 6.8 million units.

NAHB's Housing Market Index, which is based on monthly surveys of single-family builders, rose in November, the highest level in two years. Weekly surveys of lenders conducted by the Mortgage Bankers Association continued to show near-record applications for mortgages to buy homes as November drew to a close.

"Strong forward momentum in the monthly and weekly indictors virtually guarantees strong support to the U.S. economy from the single-family housing market in the final quarter of 2002," Seiders said, and that support will be quite important to maintenance of positive GDP growth within what Federal Reserve chairman Alan Greenspan calls the "soft patch" that the economy hit at the end of the third quarter, largely because of impacts of "heightened geopolitical risks" on the behavior of businesses and consumers.

House price increases are decelerating, but not falling, Seiders said, despite rampant speculation about "bubbles" in house values.

Prices continue to rise at a healthy pace in most places. Nationally, house prices were up by 6.2 percent in the third quarter, compared with the 2001 period. This performance extended a pattern of gradual deceleration from the peak rate of increase -- about 9 percent -- recorded in early 2001 just before the recession began.

Growth in inflation-adjusted house values has been decelerating as well, "but substantial gains still are accumulating in an environment of very low rates of general price inflation," according to Seiders. House prices have been decelerating in most parts of the country, but outright declines still are hard to find on an annual basis. In the third quarter, prices were up from a year earlier in all nine Census divisions, ranging from 9.8 percent in New England to 3.1 percent in the East South Central area, and in all 50 states -- ranging from 14.1 percent in Rhode Island to 2.1 percent in Utah.

"That means that real price gains were registered in all major regions and virtually all states," Seiders says. "Indeed, all but 10 of 185 major metro areas had annual price gains of more than 2 percent in the third quarter and only one area, San Jose, Calif., was in the red zone at -0.4 percent," owing to its heavy dependence on the still faltering technology sector.

"It's becoming increasingly clear that the prophets of house-price doom are simply wrong," Seiders says. "It's likely that rates of house price appreciation will continue to decelerate somewhat further, moving into the 4 percent to 5 percent range on a national basis, but widespread declines in real house values are extremely unlikely. Furthermore, widespread declines in nominal house values are out of the question in an environment of strengthening economic growth and only modest upward pressure on interest rates.

Seiders says that the corporate sector still governs shape of economic expansion.

The recession of 2001 was concentrated in the nonresidential business sector, and "profound weakness in corporate profits along with the protracted decline in the stock market have forced corporate America into a frenetic process of cost cutting that has held back hiring as well as spending on inventories, capital equipment and nonresidential structures."

Unwinding of the excesses of the late 1990s and the construction of foundations for the next expansion obviously are taking some time, he says, but the process is moving along.

Profit reports now are mixed rather than overwhelmingly negative. Inventory/sales ratios are back in reasonably comfortable zones. Spending on equipment and software has perked up to some degree after six quarters of contraction. Spending on nonresidential structures is still trending downward, although there were some glimmers of hope in the October construction data.

"Decent recoveries in corporate profits and the stock market, along with growth in business spending on labor, inventories, capital equipment and structures, are central features of our projected economic expansion for 2003 – 2004," according to Seiders.