Optimistic Outlook for Housing, But Challenges Remain
According to a recent NAHB Construction Forecast Conference Webinar, the housing market is on the road to recovery, being carried forward by low interest rates, pent up household formations, stabilizing prices and budding employment growth. "Home buyer tax credits [which expired in April] clearly did their job and got people back into the marketplace," said NAHB Chief Economist David Crowe, who also served as moderator of the two-hour Webinar.
However, many factors continue to drag on housing at this time - including the critical shortage of credit for new and existing projects, competition from short sales and foreclosures and regional economic disparities.
The availability of acquisition, development and construction (AD&C) financing remains a major concern as the industry moves forward, Crowe said. "Builders still tell us that credit is extremely tight. Banks are saying not so much. That gap is an indication that something is broken, at least when it comes to residential construction."
NAHB is forecasting 552,000 single-family starts in 2010, up 25 percent from last year's 445,000 level, which was the lowest annual output since 1959 when the government began collecting this data. Suffering from an acute shortage of available financing and a significant shadow inventory of homes lost to foreclosure that are competing against normal inventory, Crowe said that multifamily housing starts are expected to lose further ground this year, falling 18 percent to 93,000 units, before rebounding to 150,000 units in 2011.
Crowe anticipates that nationwide home prices will remain flat this year and post a modest increase in 2011, and that mortgage interest rates will continue to stay low, barely breaking 6 percent by the end of this year, and not rising much above that level through 2011.
The road back to normal levels of residential construction will be longer for some states than others. By the end of 2011, the top 20 percent of the states will see their production levels back to normal. Those states include Texas, Oklahoma, Montana, Wyoming, Tennessee, Louisiana, Mississippi, Alabama and Arkansas and Kansas. The previous boom markets in California, Arizona, Florida and Nevada, along with the Great Lake states of Michigan, Indiana, Ohio, Illinois and Wisconsin that were hit by deep cuts in auto production and manufacturing, will be the last ones to recover.
For more on this story from NAHB, read here.