The Tide Has Turned for Builders
Long before any one of the housing economists at the National Association of Home Builders (NAHB) annual trade show made their pronouncement, it was pretty obvious that the tide had finally turned for the home building industry. You could see it on the faces of those attending the International Builders Show as they walked into the Las Vegas Convention Center. In the exhibit halls and education sessions, the razzle dazzle of the heyday was still missing and attendance was well off the 100,000 plus of the peak, but cautious optimism and an overall feeling of confidence were clearly replacing the pessimism so pervasive during the last few years.
“Nearly every measure of housing market strength — sales, starts, prices, permits and builder confidence — has been trending upward in recent months and we expect to see gradual but steady growth along these lines in 2013,” said NAHB’s Chief Economist David Crowe.
In particular, Crowe said that house prices are up nearly 6 percent on an annualized rate over the past 10 months and price increases are adding to growing consumer confidence in housing as an investment. Price increases, he explains, have been “a trigger for demand to return. People feel comfortable if they buy a house that it will appreciate, not depreciate, in value.
All three economists speaking at NAHB’s outlook press conference underscored the damper tight lending standards are putting on sales. And federal banking and housing oversight committees are expected to release rules on what constitutes a qualified mortgage this year, which could potentially constrain mortgage lending even more.
In spite of a litany of potentials that could derail the recovery, they foresee steady improvement for home sales and prices in 2013. Frank Nothaft, Freddie Mac’s chief economist, projected an 8 percent increase in home sales in 2013. Dave Berson, former NAHB Chief Economist and chief economist at Nationwide Insurance, expects housing and autos to lead the economy in 2013. One driver for sales and increase in demand for rentals has been household formation, which, according to Berson, is key to demand, which he sees picking up significantly in the next three to five years.
“Finally, housing is doing its job in the overall economy. Finally housing is leading us out of the recession even though it’s taken three to five years for that to happen,” observed Crowe.
BY CAMILLA McLAUGHLIN
Photos © Oscar Einzig Photography