William Poole, President of that institution gave a presentation today to the Industrial Asset Management Council Convention today. Here are some key excerpts:

…recent events suggest that housing will remain weak for several more quarters; stabilization may not begin until well into 2008. Probably the most important statistics in this regard are the number of unsold new homes still on the market relative to their current sales rate and the recent trends in house prices [see Figure 7 below]…Some potential homebuyers are no doubt delaying purchase because they expect house prices to fall. As seen in Figure 8 [below], prices have decelerated sharply nationwide. According to the price index published by the Office of Federal Housing Enterprise Oversight (OFHEO), through the second quarter of 2007 prices are still a bit above year earlier levels. (11) However, another measure of national house prices—the S&P/Case-Shiller price index (SPCSI)—actually declined 3 percent in the second quarter from a year earlier….A decline in home prices on a national average basis is relatively rare. In fact, using OFHEO data, there has been no such decline over four quarters since the inception of the purchases only OFHEO index in 1991 or since 1975 using OFHEO’s total index, which includes refinancings. It appears that we are in uncharted territory, and, given that fact, a forecast of house prices must be regarded as highly uncertain. According to the latest Blue Chip survey, the Consensus expectation is for the S&P/Case Shiller house price index in December 2007 to be 5.6 percent below that from a year earlier and for the index to fall an additional 3.9 percent in 2008. The Blue Chip consensus forecast also projects that real residential fixed investment will decline 15 percent this year and by another 7.6 percent in 2008.

While we continue to believe Maui is a unique locale, it cannot be wholly immune from what Pool discussed today.