Signs of Modest Recovery Seen for Housing

Signs continue to point to a modest, fragile recovery for housing in 2010, with sharp differences in local markets and overall growth thwarted by a continued sluggish job market. Among the statistics and forecasts released by government agencies, research firms and industry-related trade associations in recent weeks were the following:

It will be at least early spring before notable gains in sales activity are posted for existing homes, as buyers respond to the recently extended and expanded tax credit, the chief economist for the National Association of Realtors said last month. According to Lawrence Yun, the fact that pending home sales are comfortably above year-ago levels indicates the market has gained sufficient momentum on its own. “We expect another surge in the spring as more home buyers take advantage of affordable housing conditions before the tax credit expires April 30,” Yun said. The Washington, DC-based NAR is projecting that an additional 900,000 first-time buyers will qualify for the extended tax credit, in addition to about 2 million buyers who have already purchased. About 1.5 million repeat buyers also are expected to benefit from the credit, the NAR said.

Homeowner improvement spending is likely to reach a cyclical bottom this quarter and steadily increase through 2010, according to the latest “Leading Indicator of Remodeling Activity (LIRA),” released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. “It appears we may be near the bottom of the current remodeling cycle,” said Nicolas Retsinas, director of the Joint Center for Housing Studies. “With signs of stabilization in the national economy, homeowners are once again planning home improvement projects.” Remodeling industry fundamentals are generally beginning to turn positive, said Kermit Baker, director of the Remodeling Futures Program. “Sales of existing homes are on the rise and home price declines are moderating in most markets across the country,” Baker said. “Financing costs are also favorable, although credit availability remains tight for many households.”

The road to a housing recovery, as expected, “is proving to be a very bumpy ride,” according to the National Association of Home Builders, whose latest figures show a decline in new-home sales. The Washington, DC-
based NAHB, while pointing to “extremely favorable” purchasing conditions, said that “the sobering realities of a weak economy and job market” continue to impact prospects’ decision to purchase new homes (see related story below right).

Domestic shipments of major home appliances posted a modest advance in December of 2009, but ended the year down markedly from 2008, according to the latest figures from the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that December 2009 shipments were up 0.9% over the same month in 2008, although shipments declined 13% for the full year compared to a year earlier. Some 59.3 million appliances were shipped in 2009, down from the 68.2 million that were shipped in 2008, AHAM noted. Declines for the year were posted in most key product categories, including cooking, kitchen clean-up, food preservation and home laundry products, the trade association added.

Market Analysis

End of Recession, Other Factors Seen Resulting in Housing Growth in 2010

Las Vegas — The end of the economic recession, along with the continuation of low mortgage interest rates and stabilizing housing prices, will result in growth in the nation’s housing market this year, according to a panel of economists at last month’s International Builders Show here.

Improvements to housing, however, will come slowly, the economists agreed, as high unemployment levels continue to discourage consumers and push home foreclosures higher.

The panel said they expect the extension and expansion of the home buyer tax credit to generate some sales activity in the early months of the year as economic growth gradually kicks in and bolsters an increase in housing activity.

“The stage is set for the consumer to return,” said David Crowe, chief economist of the National Association of Home Builders. However, Crowe warned that this remains “a cautionary period” for housing, largely because of the current level of joblessness, which he forecast will peak at 10.2% in the first quarter and exceed 8% at the end of 2011.

The NAHB is forecasting 697,000 total housing starts in 2010, up 25.6% from an estimated 555,000 units last year. However, this year’s recovery will occur entirely in the single-family sector, where starts are forecast to rise 37.7% from 443,000 last year to 610,000. Suffering from an acute shortage of available financing, multi-family starts are expected to lose further ground in 2010, slumping to 87,000 units, down 22.3% from last year’s 112,000-unit level.