According to economists, the recession ended in June 2009, but for most Americans it doesn't feel that way. And for builders, that's the reality according to information out of the Mid-Year Construction Forecast conference held by Associated Builders and Contractors on June 8, 2011. Speakers on the Web conference included: Anirban Basu, chief economist, ABC; David Crowe, chief economist, National Association of Home Builders; and Kermit Baker, chief economist, American Institute of Architects.
"Residential construction usually leads [the country] out of a recession," Crowe said in the webcast. However, residential construction is not going to be the cause of a recovery this time around, but rather job recovery will lead us back to normal levels.
Crowe discussed positive events taking place today:
- Low mortgage rates
- Ratio of house prices to income are at normal levels: People used to buy homes three times their income, but were buying at five times their income during the boom. The ratio is now back down to three times the income - the normal level.
- Affordability is high
- Low inventory of homes
- Pent-up demand
Crowe also discussed negative events:
- Lacking job market
- House price declined again: This might affected by recent flood of foreclosures.
- Consumer confidence
Kermit Baker emphasized job and consumer confidence recovery as key to a positive construction forecast. "[The housing market] began to recover in 2010 then stabilized in 2011 and declined in April 2011," he said in the webcast. "Recovery is expected in the latter 2011, but 2012 will be better."
Baker listed the top 10 growth markets: Boston, Washington, D.C., Pittsburgh, Columbus, Ohio, Dallas, Houston, San Antonio, San Diego, and Riverside, Calif. The top 10 markets that declined included many areas that were over-built during the boom: Seattle, Portland, Phoenix, Chicago, Detroit, St. Louis, Baltimore, Jacksonville, Fla., Orlando and Miami.
Anirban Basu projected 2016 as the year when the housing market will be back at a complete recovery. Baby Boomers will retire which they've been putting off, and more jobs will available, Basu said in the webcast.
When asked specifically about the custom home market recovery in regards to new construction, Crowe said: "The custom market has put a floor on total production. While it has fallen like other components of the market, the level of production has leveled off for that component of the new construction. The component of the new home sales has been about one-third of the market but fell to under 20 percent in the mid-2000s as speculative homes became the norm. Custom is back up to about 30 percent of the market and should continue to be one steady element."