Housing starts expected to rebound slowly

Housing starts may rebound slowly, although they have begun to increase lately, according to a forecast from housing market research firm Metrostudy.

“We believe that some of the recent gains in housing starts could be given back during the third and fourth quarters of this year if the current tax credits are not extended,” said Brad Hunter, Metrostudy’s chief economist and national director of consulting. “That said, the forecast for 2010 is for steady increases in starts.”

The U.S. Department of Commerce is set to release national housing starts figures tomorrow.

Hunter said starts have increased in recent months partly because of the $8,000 tax credit for home buyers, but also because speculative inventories are down sharply among many builders.

He said home builders need to start a home every time they sell one to keep speculative inventory “at a normal level,” but that starts are nevertheless likely to rebound only slowly from this point for several reasons:

• Some builders in the bubble markets still are working off inventory.

• Some builders’ banks are cutting their credit even if they are current on their loans.

• Some builders are finding prices too low to sell homes profitably.

Nationwide, Metrostudy forecasts 562,000 housing starts for 2009, a 38 percent drop compared with the same period in 2008.

Single-family starts are forecast at 438,000, a 30 percent drop from 622,000 in 2008.

“Most markets have been improving since last spring, but some of the hardest-hit bubble markets have only recently started to see increases in starts. Those lagging markets will probably start to experience increased homebuilding activity in 2010,” Hunter said. “Homebuilders are still challenged by economic conditions, and also by the lack of credit from banks, but there are some positive trends.”

According to Hunter, those include:

• Homebuilders’ sales and traffic are up, as well as the number of prospective buyers who will actually buy a home, especially in California, Hunter said. Even weak markets like Las Vegas, Phoenix, Florida and Southern California have shown significant improvement in sales per subdivision during the last several months, he said.

• Builders’ new home inventory is under control in most markets, although there is still a large “shadow inventory.”

• Foreclosures are being bought enthusiastically, but the flow of additional real estate-owned properties is still daunting.

In the release from the government expected Tuesday, September starts are likely to be up for single-family homes, but down for multifamily housing, Hunter said.


Source: Austin Business Journal