American Home Builders are Optimistic About the Housing Recovery

by 27 Apr 2012

( -- A housing forecast recently presented by the American National Association of Home Builders (NAHB) calls for a slow, yet positive, economic recovery. Two NAHB economists and the senior managing director of an advisory group discussed current trends observed in several real estate markets across the United States during a recent webinar. The consensus reached was that current figures are only indicative of volatility, rather than steady performance.

The relevant key housing indicators, like sales of new properties and construction activity, are pointing to a brighter -albeit slow-moving- future for American housing.

Other important factors that support a gradual recovery in many real estate markets in the United States include: housing demand and mortgage interest rates, which for the most part are expected to remain under 5 percent until next year. Like in any other economic recovery, some obstacles are expected to stand in the way, and to this extent the unemployment rate, the European debt crisis, strict lending guidelines, and inaccurate appraisals could have a negative effect for home builders.

New Home Sales Forecast

While there is a large inventory of low-priced existing homes on the market, builders are expecting that more than 500,000 single-family homes will be built this year. The pace of new home sales in 2012 is projected at 357,000.

Construction of multifamily residences is already enjoying increased activity. The next two years will see more construction of new apartments, condos and town homes, albeit at a reduced pace.

Sales of new homes usually lag behind production, but houses hunters are often attracted to newly-constructed projects. The key to a full recovery in new home sales will be contingent upon how fast the large inventory of existing home sales will take to ease up on the number of unsold properties. Once the number of existing homes is back to normal levels, demand for new construction residences will pick up.

Keeping Up with Demographics

Housing demands will once again be driven by census statistics, which means that more than a million new homes will have to be built in America over the next ten years to sustain population growth estimates. Home construction projects are typically sustained by demographic factors, while the oversupply experienced due to artificial demand during the housing boom is not expected to return.

A Regional Recovery

Not all real estate markets will recover at once in terms of residential construction. Some markets in Arizona and Nevada will take longer to recover due to the number of homes that were constructed in the mid-2000s, and yet they remain unsold and unoccupied.

The states where analysts are predicting higher demand of new construction projects are Oklahoma and Texas, due to their stronger economies resulting from the oil industry.


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