Housing will see gradual improvements in 2011 as the economy and job market improve, establishing momentum that will produce more considerable gains in 2012, according to economists at the NAHB International Builders’ Show in Orlando on Jan. 12, 2011.
NAHB Chief Economist David Crowe said job growth will provide a stronger stimulus in the housing market than 2010's home buyer tax credits. "This year’s spring selling season will be better than last year’s," he said.
Crowe's forecast called for 575,000 single-family home starts in 2011, up 21% over 475,000 in 2010, which in turn was up 7% from 442,000 in 2009.
Multifamily housing, poised to profit from a disproportionate number of Gen Y members entering the housing market, has seen the bottom of the cycle, Crowe said. He forecast starts to rise 16% in 2011 to 133,000 units, with a further 53% increase in 2012 to 203,000 units.
Builders’ access to the credit they need to start new homes remains the fragile component of the NAHB forecast, Crowe said. So far, small builders have experienced extreme difficulty in obtaining financing.
Crowe noted a rebound in the confidence of consumers, who "froze in place, faced with a lot of uncertainty" in mid-2010. Recent increases in durable purchases, he noted, indicate consumers are less afraid today of losing jobs and income.
Crowe also sees the U.S. economy getting a boost from the tax package enacted in the last days of 2010, Crowe said, including more income going to wage earners thanks to a one-year, 2% reduction in Social Security taxes.
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 up slowly this year, he said, because it will be driven by the relatively low housing production Plains states. States with traditionally strong housing activity, like California and Florida, will not be among the state housing markets that recover the fastest.
Freddie Mac Chief Economist Frank Nothaft, citing research from the Harvard Joint Center for Housing Studies, said households should be growing at an average annual rate of 1.2 million to 1.5 million over the next five to 10 years. He said this suggests the need for a sharp increase in housing production; half the 500,000-600,000 starts of the past two years were needed just to replace the number of homes being removed from the housing stock.
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