The housing market will start its long awaited recovery this year, two key economists predicted at the National Association of Home Builders convention in Orlando. But because starts and sales are at such a low point, they warned, even a big percentage jump in the two important indices will not result in much of an improvement.
"We're starting from a soft spot," NAHB chief economist, David Crowe, reminded reporters, noting that the second half of 2010 was "much poorer" than the first six months. "We're coming off such a low base that the market will still be only half of what it should be."
However, a third economist, Edward Sullivan of the Portland Cement Association, said that Crowe's less-than-arousing projections and those of Frank Nothaft, chief economist at Freddie Mac, were too optimistic.
Sullivan told a separate press briefing he doesn't expect any significant increase in housing starts this year. "Twenty-twelve is the year we're going to start to see a recovery, not this year," the PCAs chief economist said.
Sullivan said job growth will be modest at best this year, lending standards will remain tight, and foreclosures will continue to grow. These three factors, he added, form a "powerful combination" that will keep builders from once again putting their shovels in the ground.
"The only reason to build is to make money," the PCA economist said. "And builders can't do that right now."
But Crowe said 2011 will definitely be a better year for builders, if only because of the underlying demographics. "There's enormous pent-up demand," he said, noting that some two million households that should have formed over the last few years failed to do so.
"The populations should have given us two million more households than it did," the NAHB's chief economist explained. "And they are out there waiting to be the next ones into a new house or apartment."
Crowe also predicted that economic and job growth will both improve as the years goes on. And Freddie Mac's Nothaft agreed, saying that "a less than exuberant opening to 2011 does little to dampen our expectations that the recovery will continue to gather strength as the year goes on."
The NAHB is projecting that builders will start 575,000 single-family houses this year, a 21% increase from an estimated 475,000 in 2010. And it expects single-family starts will reach 860,000 in 2012. However, the PCA is looking for just 492,000 single-family starts this year and 690,000 in 2012. "Recovery is a long process," Sullivan warned. "It's not going to happen overnight."
