The Real Estate market is an exciting market to watch. Although the past few years have not all that fun watching the Real Estate market spiral downwards with the nation's economy, it is fascinating to see real estate work through its economic cycle. In 2004 to 2006 we saw new home construction surge across the nation and locally here in South Walton Beach in response to a strong demand for Real Estate. As we had an over supply of homes we witnessed a dramatic market crash that had home prices plummeting. New construction almost completely dried up in 2008 and 2009. What was once a booming business in South Walton Beach now forced hundreds of local companies to go out of business and new home construction come to a complete standstill. Without a supply of new homes we have been able to sell through a significant amount of our available inventory. As inventory decreases, demand for new construction increases.
So what is the Homebuilding Forecast for 2010?
The fragile housing recovery should gather momentum this year as the economy strengthens, but high unemployment at least through 2011 will make for a slow turnaround, housing experts said Tuesday.
The panel of economists at the 2010 International Builders’ Show in Las Vegas agreed broadly on the outlook for the housing market and economy. Both, they said, had turned a corner, but there are slim prospects for a swift rebound.
“It won’t be a strong recovery, but it will be a recovery,” said David Crowe, chief economist for the National Association of Home Builders.
His forecast calls for sales of new and previously occupied homes to weaken after tax credits for homebuyers expire in April. But 2010 sales of new homes will be up by more than one-third, he said, and almost 7 percent higher for resales.
Crowe also sees home prices remaining stable going forward, though some cities may still see some slight declines in the coming months.
“I believe we’ve seen the worst of the house price declines … The stage is set for the consumer to return,” Crowe said.
He expects builders to ramp up construction this year, with newly built homes totaling around 700,000. That would be a 25 percent increase over his tally for 2009. While he anticipates the economy will add some jobs in the April-June period, he projects unemployment will peak this year at 10.2 percent and then fall gradually to around 8 percent by the end of next year. Applications for new building permits, a gauge of future activity, rose 11 percent to an annual rate of 653,000, a far stronger showing than economists had predicted and the highest level of activity since October 2008.
But homebuilders’ fortunes have brightened in recent months. Low interest rates and an $8,000 tax credit for first-time home buyers helped stoke demand for homes. The incentive was scheduled to expire at the end of November, but Congress extended the deadline through April and added a $6,500 tax credit for current homeowners who move.
Still, recent figures have raised doubts about how strong demand will be in the coming months.
New homes sales tumbled 11 percent in November from October to the lowest level since last spring. The number of people preparing to buy a home in November also dropped.
That’s left many homebuilders nervous that demand is weakening. Homebuilders’ confidence, measured by an NAHB’s index, fell this month to 15. It was the second-straight monthly decline and the lowest level since June.
The index reflects a survey of 504 residential developers nationwide. Index readings below 50 indicate negative sentiment about the market.
David Berson, chief economist for mortgage insurer PMI Group, said he expects mortgage delinquencies and foreclosures to climb this year. But he anticipates that banks and other mortgage companies will continue to hold properties on their books, rather than dumping them on the market at depressed prices.
“That does mean it will be longer before we start to get a real recovery in home prices,” Berson said. “By the time we get to 2011, the majority of the states should have price gains.”
He projects home prices fell almost 13 percent in 2009 from the prior year. His forecast calls for home prices to decline about 5 percent early this year, but end the year flat.
Freddie Mac Chief Economist Frank Nothaft, meanwhile, said he sees home prices to decline 3 percent this year. His forecast calls for mortgage rates to remain below 6 percent this year.
