NAHB Upbeat About 2011 Housing Starts



Economists who appears at the Orlando NAHB International Business’ show last week suggest the housing market will see gradual improvement this year. Citing recent momentum as the reason for optimism, the group expects the industry to seek higher ground in 2011.

NAHB Chief Economist David Crowe has this to say about the prospects for jobs, growth, and business stimuli in 2011: “This year’s spring selling season will be better than last year’s.” Crowe also forecast close to 600,000 single family house starts for this year, an over 20 percent climb over last year’s 475,000 starts. Taken a step further, the news also brings to the forefront Gen Y people moving into the new housing market.

The disproportionate numbers of this generation now flexing their economic muscles (granted at the worst time in recent history) says a lot about this segment of the market. In short, Gen Y profits in the industry will be on the rise from now on.

A new family home started

There's no feeling like the beginning of a new home - courtesy Keeping It Real Estate

The down side of the news is that Builders’ access to monies they need to build new homes is a fragile element of new housing momentum. And smaller builders are up against and almost impenetrable wall where financing is concerned. Banks are understandably hesitant to invest money in new houses, when their inventories of bad home loans is so high. A massive tax incentive package enacted last year, among other government spurred incentives, should help restore some confidence in the economy.

The chart below from the California Building Industry Association does not exactly support Crowe’s claims unless the industry there has bottomed out.  However, data on permits from the US Census (PDF)show that in the South new construction does appear to be on the rise. It makes sense that Florida would be one of the fastest growing markets too. In fact, the South shows double the permits of any other US region.

Chart on new starts via CBIA

Starts via California Building Industry Association

Crowe predicted that new home sales would struggle a bit until sales begins to follow rising employment figures. He further predicted that California and Florida, being the hardest hit, would be the markets most likely to grow the fastest. The news also spotlights Freddie Mac Chief Economist Frank Nothaft as saying; “Affordability and demographic trends will help support demand.” Despite predictions,  adding jobs and income into the real estate equation is the biggest factor to consider.

The country is so dependent on new home starts when you think about it. The building industry provides so many jobs, so much economic power epecially since manufacturing has gone down in the US. Investors should get cracking trying to rejuvenate the industry, so that other sectors can benefit. This is a crucial industry for America’s full recovery. Construction workers buy homes too.

Primary source, Press Release from Business Wire and the National Association of Home Builders.

A whisper of the home market elevating is enough

A California development - one that prays economists are correct - courtesy Boston