Builder confidence in the market for newly built, single-family homes is at its highest level since the housing market collapse, the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) shows.
The survey released last Tuesday by the homebuilders and national banking giant measures “sentiment” and reports that the confidence level nudged up one point from the previous month to rest at 29.
This is the highest level the index has attained since May of 2007, the National Association of Home Builders says.
But David Crowe, chief economist for the association, is not ready to lead a round of cheers. “We’re going to have some relatively low growth for the rest of the year and into next year,” said Crowe, who put home construction growth at 2 percent for the rest of this year with an inching up to 3 percent for 2013.
Taking part in a mid-year construction forecast news conference last Tuesday, Crowe acknowledged the rise in the sentiment index to 29, but noted it is far from the peak of 72 it reached before the bursting of the real estate bubble. Still, the 29 marks a sizeable improvement from the 8 that the survey sank to in early 2009, he said.
Fifty is considered the “gold mark,” Crowe noted.
He said he expects sales of existing homes to continue to pick up, just as they have been doing for the last two years. If that happens, “we’ll get some single-family starts,” he said.
“I’m seeing 500,000 home starts for 2012,” the construction economist said, and noted a normal year would be 1.5 million home starts.
Look for a whopping 56 percent increase in multi-family residential construction starts this year over last year as builders try to catch up with a backlog in demand that started with the entry of 600,000 new renters into the market at the end of the last decade. Crowe said.
Kermit Baker, chief economist for the American Institute of Architects, said home ownership is at its lowest level in 30 years.
Joining Crowe in the online news conference, Baker related just how much catching up lies ahead for the home construction sector. In an average year, home builders erect 1.3 billion square feet of product. “We were at 600 million square feet at the end of last year. So obviously, we have a lot of catching up to do.”
Baker and Crowe both noted that the regionalized nature of the current housing slump makes it different from previous ones.
For instance, for distressed mortgages nationwide the rate stands at an eight-and-one-half months inventory, meaning at the current pace of sales it would take that period of time to sell off the available supply of distressed properties. “Six states have over a year’s supply,” Crowe said. “But over half the states have less than six months supply.”
Florida leads the distressed parade with a 19-month supply, according to Crowe.
“This recovery is not going to be even.”
Crowe said he thinks home prices have bottomed out but buyers are yet to accept that belief. “It is difficult for buyers to see the end of this and therefore get confidence” they are getting the lowest price, he added.
Home buying is still constrained by elevated lending standards, he noted, and added that many sales are falling through because the appraised price of the home does not rise to the amount for which it is under contract.
Some of the areas of the country hardest hit by the housing slump — Phoenix, for instance — are starting to see a rebound in residential construction. The problem: laborers left when the jobs dried up, Crowe said.
“We’re starting to see some serious labor shortages” where the building revivals are occurring, he said. “Something that would assist in filling the labor shortage would be quite helpful.”
The difficulty, said Baker, the AIA economist, is that potential workers can longer pick up and leave for the new jobs. “With 25 percent of mortgages underwater right now, many would-be construction workers can’t move,” he said.