Three economists, more opinions
Three economists from three different organizations shared one view during the National Association of Home Builders, or NAHB, fall construction forecast: The housing downturn isn’t going to end until the job market improves.
The Oct. 27 webinar, moderated by the NAHB’s chief economist David Crowe, tried to cast an uncertain future in a positive context, at least in terms of housing demand. But each expert had a different take on how the next few quarters will play out, given the unpredictability of government spending and home foreclosure rates.
Maury Harris, chief U.S. economist at UBS Securities, put the recovery in a political context with some forecasting of the Nov. 2 election. Harris felt certain enough to predict that, if Republicans gained control the House of Representatives—which they did—“The small business community is going to feel better about the course of [action] in Washington. We’re going to see a pickup in confidence.”
Whether this translates into more hiring or not remains to be seen. UBS is predicting a 9% unemployment rate at the end of 2011, with 2.7% GDP growth in 2010 and 2011. Consumer spending is rising, Harris noted, and so is the personal saving rate. Not a bleak scenario, but with jobs as a wild card, the economists focused more on the rental market, home affordability and pent-up demand for housing than a recovery timeline.
Rental housing availability is tightening, Harris said, and rents on new leases are starting to go up. The NAHB’s Crowe said he had heard scattered reports of scarce rentals.
“The concern now is that there isn’t enough retail property for all those people who’ve ruined their credit and can’t afford to buy,” he said.
Although multi-family construction made a surprise rebound mid-year, these units will not be ready for the current population of apartment seekers.
But there is good news for those who stayed clear of the foreclosure pit. Housing is very affordable, Crowe said, although the selection may be limited; with only 200,000 new unsold homes on the market, inventory has not been this low since 1968.
“Builders are being very careful. They’ve reduced their [building of] speculative homes,” Crowe said.
All three economists believed that pent-up demand for housing would eventually burst through. Crowe estimated “the gap” of unmet housing needs—people living with parents or doubled up—at 500,000 to 1.5 million households.
“We’ve got a lot of people right on the edge. They’re ready to move out,” he said.
Eric Belsky of the Harvard Joint Centers for Housing drilled down into the demographics of the demand for new homes, which will come largely from immigration (though at pre-1990s levels) and Echo Boomers (the 20-somethings). He estimated new household growth in the country to fall in the range of 11.8 million to 13.8 million between 2010 and 2020. Roughly two-thirds of that number will result in new housing demand, the Harvard Center research shows.
Whether demand translates into purchasing is an arrow that points back to job growth — the great unknown in everyone’s forecasts. Employment is going to be the key to the rebound, according to Belsky. But he also noted that the market will be primed for new buyers.
“When people come out of their bunkers, they’ll come into a [housing] market that’s remarkably affordable,” he said. “And that’s likely to hold for the better part of next year and beyond.”
Kleer Lumber gains distribution through iLevel
iLevel by Weyerhaeuser is now distributing Kleer Cellular PVC Trimboard, sheet goods and other Kleer cellular PVC building products from its Baltimore, Md., and Easton, Pa., distribution centers.
iLevel is a new partner for Kleer as the company serves the key building markets of New Jersey, metropolitan New York and other Mid-Atlantic regions including Eastern Pennsylvania, Northern Virginia, Maryland and Delaware.
“iLevel is an ideal partner for Kleer Lumber because of its strong brand name, the products it represents in the marketplace and its commitment to outstanding service,” said Walt Valentine, president of Westfield, Mass.-based Kleer Lumber. “iLevel’s renewed commitment to focus on specialty product groups aligns perfectly with the core product development strategy at Kleer Lumber.”
Construction industry loses more jobs
The construction unemployment rate rose to 18.8% in November as the sector lost another 5,000 jobs since October, according to the Associated General Contractors of America, which just released an analysis of new federal employment data. The analysis indicates that the construction sector has been the hardest hit of any industry during the economic downturn, association officials said.
The industry’s 18.8% unemployment rate, not seasonally adjusted, was the highest of any industry and roughly double the overall unemployment rate. The construction industry has lost 2.1 million jobs since employment in the sector peaked in August 2006, according to the association. Since November 2009, the industry has lost 117,000 jobs, while the private sector added 1,088,000 jobs.
“The unemployment report shows construction still has not broken free of the recession that has gripped the industry since 2006,” said Ken Simonson, the association’s chief economist. “Other than the stimulus and other temporary federal programs, it has been a pretty bleak four yours for the industry.”
The only construction segment to add jobs in the past years has been heavy and civil engineering construction, which has benefited from federal stimulus, military base realignment and Gulf Coast hurricane-prevention projects, Simonson observed. Meanwhile, residential construction has lost 79,000 jobs over the past 12 months, while nonresidential specialty trade contractors and nonresidential building — the other two segments in the nonresidential category — have lost 62,000 jobs.
Association officials cautioned that the stimulus and other temporary federal programs would begin winding down in 2011, most likely before private, state or local demand for construction picks up. They urged Congress and the Obama Administration to act on a series of long-delayed legislative bills for water, transportation and other infrastructure programs.