At IBS, credit availability subdues forecasts
Orlando, Fla. — The International Builders’ Show has become an annual launching pad for housing forecasts, and this year’s numbers came with a healthy dose of guarded optimism. David Crowe, chief economist from event sponsor National Association of Home Builders (NAHB), predicted a 21% increase in single family housing starts in 2011, with 575,000 new units compared to 475,000 in 2010. Pent-up demand and new household formation will combine in 2012 to form 860,000 new single family units, Crowe said in a Jan. 12 press conference.
A more conservative estimate came from Edward Sullivan, chief economist of the Portland Cement Association, who earlier in the day projected 492,000 housing starts in 2011. Sullivan expressed concerns over the availability of credit, too much housing inventory on the market, and home prices still in flux. These factors will delay a housing recovery until 2012, he said, and the pace will vary widely region to region.
The most positive news of the conference may have come from a panel of multifamily builders who shared their plans — and their pain — during the Economic Forecast and State of the Industry for Apartments and Condos on Jan. 13. The general consensus was that the worst was behind them.
Robert Greer, president of Michaels Development Co., built 4,000 rental units last year in 31 states and plans to double that number in 2011. Michaels Development, which employs tax credits for their affordable housing units, has had to find alternative sources of financing to replace Fannie Mae and Freddie Mac. Difficult though it was, Greer is happy to be free of both agencies and has begun doing much of his own construction lending as well.
Jay Jacobson, a multifamily builder who specializes in apartments, plans to construct approximately 2,000 units this year, compared to 112 in 2009 and zero in 2008. “There’s an amazing amount of private equity around, looking to invest” in residential construction, Jacobson said. The catch is that the developer or builder must put up a considerable amount of equity, he added.
Two other builders, Bill McLaughlin of Avalon Bay Communities has nearly 800 coastal units in the pipeline and Steven Patterson of ZOM Holdings is looking at 1200 units in 2011. The NAHB’s Crowe pointed out that vacancy rates have been falling for a year and rents are going up. “This is a good sign that it’s time to start adding to the stock,” he said.
Crowe’s prediction for multi-family housing starts was a 16% increase over 2010, with 133,000 units, up from 114,000 in 2010.
Remodeling poised for growth
The U.S. home improvement industry is poised for growth, according to a new report released today by the Joint Center for Housing Studies at Harvard University.
The report, “A New Decade of Growth for Remodeling,” is the sixth and latest report in the Improving America’s Housing series, published by the Remodeling Futures Program at the Joint Center.
“As both the economy and the housing market stabilize, so too will homeowner improvement spending,” said Abbe Will, a researcher with the Remodeling Futures Program.
According to the report, remodeling expenditures are expected to increase at an average annual rate of 3.5%, below the pace during the housing boom, but sharply recovering from the recent downturn.
Market fundamentals, such as the number of homes in the housing stock, the age of those homes and the income gains of homeowners making improvements, all point to increases in the industry that has seen double-digit decline since its peak in 2007.
“Metropolitan areas with rising house prices, older housing stocks, higher incomes and home values, and a larger share of upscale remodeling expenditures, such as Boston, San Francisco and Los Angeles, are well-positioned for an upturn in remodeling activity,” said Eric Belsky, managing director of the Joint Center.
The report anticipates that in the next five years the majority of remodeling spending will shift from upper-end discretionary projects to replacements and systems upgrades. Further, it points to a number of growth opportunities generated by underinvestment in distressed properties, lower mobility, changing migration patterns and the rise of environmental awareness.
“Lower household mobility following the housing market crash means that in the coming years homeowners will increasingly focus on improvements with longer paybacks, particularly energy-efficient retrofits,” said Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “Also, a slowing of migration to traditionally fast-growing Sunbelt metro areas means that, at least temporarily, more remodeling spending will remain in older, slower-growing areas in the Rustbelt and in California.”
NAHB forecasts 20% growth in starts
Orlando, Fla. — The annual Housing and Economic Outlook at the 2011 International Builders’ Show had some relatively good news for attendees.
A disappointing 2010 is expected to serve as a platform for a take off in 2011, according to David Crowe, chief economist and senior VP at the National Association of Home Builders (NAHB). Crowe and the NAHB forecast 708,000 total housing starts this year, up about 20% from an estimated 589,000 in 2010. The NAHB expects single-family housing starts to increase 21% to 575,000.
Crowe pointed to housing affordability, demographic forces and pent-up demand as three key factors that will affect growth residential construction. "It’s only so long that a 30-year old can live in his mom’s basement," he said.
Crowe’s forecast was backed by a second economist on the panel, Frank Nothaft, chief economist for Freddie Mac. Nothaft sees the economy as "strengthening and accelerating" in 2011. The Freddie Mac economist also forecast unemployment to finish 2011 at the 9.0% level, down from the current 9.4%.
Disruptive weather prevented a third economist, David Berson of the PMI Group, from arriving in Orlando in time for the session.