WASHINGTON - The U.S. housing market is on the road to recovery but that road will not be without bumps over the coming months, according to economists participating in Tuesday's NAHB Construction Forecast Conference Webinar.
"Home buyer tax credits clearly did their job and got people back into the marketplace," said NAHB Chief Economist David Crowe. With the expiration of the tax credits in April, Crowe said the housing momentum is being carried forward by low interest rates, pent up household formations, stabilizing prices and budding employment growth.
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 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," Crowe said.
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 added that 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.
Mark Zandi, chief economist of Moody's Analytics, said that housing will improve as the job market does. He forecast that the economy will average monthly job gains of 125,000 this year, 250,000 in 2011 and 300,000 in 2012. Zandi forecast that overall housing starts will total 700,000 units this year, close to 1 million in 2011 and about 1.7 million by 2012, which he describes as close to trend and consistent with demographics in a normal functioning economy.
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