Housing less of a drag on GDP in 2009: group

NEW YORK (Reuters) - The battered housing sector will be less of a drag on the U.S. economy this year than the steep drain on growth in 2008, according to a top housing economist.

The year-long U.S. recession will likely persist into mid-year, followed by modest growth starting in the third quarter, Jay Brinkmann, chief economist with the Mortgage Bankers Association, said on Monday.

He estimated that gross domestic product, the broadest measure of the economy, will likely shrink by 0.1 percent in 2009 after an expected 0.7 percent decline last year.

The 2008 fourth quarter will likely mark the biggest quarterly contraction in GDP, at minus 5.8 percent on an annualized basis, Brinkmann said.

He said his current forecast depends on the size of a government stimulus package and whether it contains steps such as tax refunds that could boost consumer spending as early as the end of the first quarter.

Proposed federal measures to revive the economy will compensate for the problems plaguing the housing sector -- falling prices, meager cash-outs of home equity, relatively tight credit and a faltering job market, Brinkmann said.

For the new-home market, he predicted sales would fall 31.1 percent this year to 335,000 units following a 37.3 percent drop in 2008, while prices would decline 5.1 percent to an average $217,200 after a 7.7 percent fall last year.

The larger existing-home segment will likely post a rebound after two dismal years. Existing-home sales could rise by 1 percent to 4.899 million units, while prices would slip 3.5 percent to an average $190,800 after a 9.7 percent drop in 2008, according to Brinkmann.

Given the prospects of weak sales and vast supply, developers will continue to cut back on home construction, he said. "The drop in residential investment will continue through 2009."

Residential investment will likely fall by 10.5 percent this year after falling 19.5 percent last year and 19.0 percent two years ago, he said.

Meanwhile, housing starts would decline to 698,000 units, down 23.3 percent in 2009, Brinkmann said, after a 32.9 percent annual drop in 2008 and a 24.8 percent fall in 2007.

(Reporting by Richard Leong; Editing by Leslie Adler)