The Concord Group is projecting a national home sales recovery for the fourth quarter of 2012 based on its just-completed United States Housing Outlook report.
With approximately 18 months of supply on the market, the Newport Beach, Calif.-based firm said it expects a return to normalized absorption rates by the first quarter of 2012.
This demand projection is in line with total new home sales performance in the early 2000s, according to Richard Gollis, principal and co-founder of The Concord Group.
TCG estimates sales for the next year will continue at current sluggish levels (400,000 units), with a recovery rate of approximately 640,000 units annually until the market returns to normalized absorption rates by the fourth quarter of 2012.
This timeline is supported by broader economic forecasts and the amount of preselling of current year demand during peak years, the company said.
TCG reported that the current national overhang totals 1.36 million for-sale units (all product types). This total includes 210,000 currently selling homes and lots, 560,000 completed finished lots and nearly 590,000 competitive foreclosures (calculated on homes built since 2003).
According to TCG, the number of new home sales in 2010 fell 70% from the 2005 peak and was the lowest since 1963. TCG regularly tracks 16 U.S. metro areas where new homes are down between 43% and 86% from their respective peaks. For metros with relatively low levels of inventory and improving fundamentals, TCG projects that recovery will happen as early as the end of 2011 and beginning of 2012.
Gollis says the current economic and housing downturn is creating opportunities for investment in the U.S. housing market, and the company is bullish about the long-term opportunities for new for-sale housing.
“TCG’s conservative valuation strategy analyzes both liquidation and going concern assessments. In cases where the discounted cash flow value is above the market liquidation value, TCG identifies a possible favorable investment,” said Gollis.
The company forecasts regions with strong long-term growth fundamentals and diversified economic bases emerging first. These include Orange County and San Jose, Calif., as well as Seattle and Washington, D.C.
“Development of quality new housing in core employment centers is expected to be an opportunity. Meeting the needs of baby boomers, highlighted by their transition to urban areas, should remain a focus,” he added.
Thus far, 2010 has been a case of “mixed messages” for the national economy. Year-to-date, TCG said that key indicators such as the unemployment rate and foreclosure filings are up over the prior year, signaling continuing weakness.
Despite these trends, the outlook says consumer confidence has remained significantly up over 2009’s historic lows, pointing to optimism amidst the turmoil.
