NAHB REPORT ON HOUSING STARTS

The national economy will continue to gain strength throughout the year, but at a slower pace than is characteristic for the early stages of recovery.

Real (inflation-adjusted) gross domestic product (GDP) is expected to grow about 3% in 2010, compared to essentially no growth (0.4%) in 2008 and negative growth (an estimated decline of 2.5%) for 2009.

Coming off an estimated modern historical low of 555,000 total starts in 2009, housing production should rebound by about 25% this year to just under 700,000 units, according to NAHB projects. There is certainly a measure of good news in this forecast, but it hardly represents a return to normalcy.

Based on demographics and other factors, an annual average of 1.8 million housing starts per year will be needed over the next 10 years and 2010 starts are not likely to provide even half of what is needed.

Improvements in residential construction this year will be largely concentrated in single-family construction. Builders successfully reduced their inventory of new single-family houses in 2009 to levels last seen in 1971—for a population that has grown by 80% since that time.

NAHB (National Association of Home Builders) is forecasting just over 600,000 single-family starts in 2010, up from an estimated 440,000 starts in 2009. In a normal market, we would be constructing 1.5 million single-family starts on average yearly.

Although multifamily housing activity should stabilize and improve by the end of 2010, it will be slower than in 2009, with starts declining from an estimated 112,000 last year to an even lower 87,000.

Difficulty in obtaining financing for condos and apartments remains a major stumbling block to new projects, followed closely by historically high vacancy rates that are expected to ease up by the second half of the year, though not by much.
Information courtesy of SUHBA