Construction Corner: Housing Recovery to be Slow, Gradual
Reblogged from Marble Institute Of America Stone Dimensions By Garen Distelhorst
May 14, 2012 · No Comments
If, in your wildest dreams, you were hoping for a rapid recovery in the housing market, forget it. A group of economists at a recent webinar on housing and the economy sponsored by the National Association of Home Builders say it’s not going to happen that way.
Instead, the experts say, that the recovery in the most downtrodden sector of the economy will be uneven and will move slowly and gradually upward in 2012.
David Crowe, chief economist for NAHB, said that while the latest monthly data have shown signs of a slight softening, this is more reflective of typical month-to-month volatility in the numbers and the unusual seasonal factors than they are an indication of any significant downward trend in the broader housing market.
Crowe says that while several factors remain positive, the housing market still continues to face formidable challenges, including rising foreclosures, persistently tight lending standards for home buyers and builders and difficulties in obtaining accurate appraisals.
“No one is anticipating that an upward path for housing will run in a straight-line trajectory,” Crowe said. “The economy is in an uneven recovery and we can expect some corresponding ups and downs in the housing market in the months ahead.”
That sentiment is probably why builder confidence in the market for newly-built, single-family homes declined for the first time in seven month this April, sliding three notches to 25 in the NAHB/Wells Fargo Housing Market Index. The decline brings the index to where it was in January, which was the highest level since 2007. An index of 50 indicates that overall more builders are more positive than negative.
“Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase. and our members are realigning their expectations somewhat until they see more actual signed contracts,” said NAHB’s Crowe.
Sales of newly-built, single-family homes declined 7.1 percent to a seasonally adjusted annual rate of 328,000 units in March from an upwardly revised, robust pace of 33,000 units in February, according to the U.S.Commerce Department.
Crowe said that the March decline is from a stronger-than-expected sales pace in February. “Looking at the first quarter as a whole, sales are up 3.7 percent from the fourth quarter of 2011. This is exactly the kind of modest, but substantive growth that we are expecting to see in the year ahead.”
Single-family housing production held virtually unchanged in March as a double-digit decline in the more volatile multifamily sector brought combined nationwide housing starts activity down 5.8 percent to a seasonally adjusted 654,000 units. the Commerce Department reported.
“While more consumers appear to be seriously considering a new home purchase, builders remain very cautious about starting new projects until they see more actual sales materializing,” said Barry Rutenberg, chairman of NAHB.
One good sign was that permit issuance gained 4.5 percent to a seasonally adjusted rate of 747,000 units in March, the fastest pace since September 2008.
On the remodeling side, business remained relatively flat in the first quarter of 2012, according to the Remodeling Market Index (RMI) compiled by NAHB. It declined one point to 47 from an upwardly revised 48 in the previous quarter. An RMI below 50 indicates that more remodelers report market activity is lower (compared to the prior quarter) than report it higher.
There is some better news on the remodeling front, according to the Leading Indicator of Remodeling Activity (LIRA), which is compiled by the remodeling Futures Program at the Joint Center for Housing Studies at Harvard University: after two years of bouncing around, remodeling activity is expected to pick up later this year.
“Hopefully, we’re finally moving beyond simple volatility in the home improvement spending numbers to a period of sustained growth,” saidEric S.Belsky, managing director of the Joint Center.