Housing will see gradual improvements this year, establishing momentum for stronger gains in 2012, said economists at the National Association of Home Builders International Builders’ Show in Orlando this week.
“This year’s spring selling season will be better than last year’s,” said NAHB Chief Economist David Crowe, with job growth providing a stronger stimulus in the housing market than last year’s federal homebuyer tax credit.
Crowe forecasted 575,000 single-family home starts in 2011, a 21% climb over an estimated 475,000 units started in 2010, which in turn showed a 7% gain from the 442,000 homes started in 2009.
He attributed the brighter forecast to gradual improvements expected in the economy and jobs market.
Multifamily, which has seen the bottom of the market, is poised to profit from a disproportionate number of Gen Y’ers moving into the housing market. Multifamily starts will rise 16% this year to 133,000 units, with a predicted 53% increase in 2012 to 203,000 units, according to the NAHB forecast.
Builders’ access to credit remains the fragile component of the NAHB forecast, Crowe said. So far, small builders have experienced extreme difficulty in obtaining financing. Rectifying the situation as soon as possible is the top priority of the association.
New-home sales, Crowe projected, “will struggle” but begin following employment gains, reaching 405,000 for the year, up from an estimate of about 320,000 for 2010.
The housing recovery will start slowly this year, he said, because it will be driven by the relatively low housing-production Plains states, with Texas the most powerful of the bunch. Traditional bulwarks such as California and Florida will lag in the recovery.
Freddie Mac Chief Economist Frank Nothaft said that housing affordability and demographic trends will help support growing housing demand.
Citing research from the Harvard Joint Center for Housing Studies, Nothaft said that households should be growing at an average annual rate of 1.2 million to 1.5 million over the next five to 10 years, suggesting the need for a sharp increase in housing production; half of the 500,000 to 600,000 starts of the past two years were needed just to replace the number of homes being removed from the housing stock.
Nothaft said supply overhangs will persist in some important large markets, but expects the housing price slump to bottom out by the middle of this year.
“Potential buyers who have resources to buy but want to buy at the bottom are likely to start coming into the market in the springtime,” he said.
Fixed-rate mortgages will move up from their current 4.75% to the 5.75% range by the end of this year, he forecasted. This will push total single-family mortgage originations down about 30% below the 2010 level as refinancings fall sharply with rising mortgage rates.
by Kerry Curry HousingWire January 14, 2011
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