A 30% Spike in Homebuilding for 2013?

Rising home builder confidence -- along with record low interest rates -- and other factors could lead to a 30% jump in single-family housing starts next year, according to a new forecast from the Wells Fargo Securities Economics Group.

WFS economists expect single-family starts to spike 23% to 530,000 units this year compared to 2011. A 30% jump in 2013 would have builders breaking ground on 680,000 new homes. 

Wells is bullish on home building, citing the fact that SF starts for the first nine months of this year are running 26% above the 2011 pace.

The economists also note in their October ‘Housing Data Wrap-Up’ report that the inventory of new homes for sale is tight and “near all-time lows.”

Meanwhile, builder confidence has been rising over the past year as sales of distressed properties (in relation to total purchases) has dropped.  “The drop in competition from foreclosures has bolstered builder confidence,” the WFS report says.

In some markets, with rents rising significantly the past few years, consumers now believe it’s cheaper to own than to rent.

With the Federal Reserve determined to keep mortgage rates low next year, “builders should be slightly more confident about building inventory going into the key spring selling season, and builders have better access to credit today than at any time since the building boom ended,” they write.  

Contacted on Wednesday, WFS senior economist Mark Vitner said he is still confident about the housing starts forecast despite the impact of Hurricane Sandy.

He called the forecast “conservative” and noted that the Northeast states do not account for a lot of housing activity.  He also noted that the forecast is based on the momentum in the housing market that has been strengthening during the second half of this year.

“We feel pretty good about the forecast,” Vitner said.