The housing market may finally be moving in the right direction, says David Crowe, the chief economist for the National Association of Home Builders, Washington, D.C.
Crowe said during a Jan. 11 NAHB webcast that some key economic and housing trends look better: U.S. Gross Domestic Product (GDP) data is on the upswing; unemployment is dropping; consumer confidence is improving; more young people are creating new households and want to purchase homes; and the three-month moving average for overall housing starts and single-family permits is much-improved.
A new economic measure that NAHB now uses to measure the health of local housing markets is also starting to flash growth signals. The NAHB/First American Improving Markets Index (IMI) identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. The number of housing markets showing measurable improvement nearly doubled in January with the addition of 40 new metros to the IMI. The IMI now boasts 76 improving markets, up from 41 in December, with 31 states and the District of Columbia represented by at least one entry.
“While relatively small metropolitan areas continue to dominate the list of improving housing markets, it's important to note that several major metros in diverse parts of the country have now joined the field as well — including such metros as Dallas, Denver, Honolulu, Indianapolis, Nashville and Philadelphia,” said Crowe. “This is an encouraging sign that gradually strengthening economic conditions are starting to take hold across a broader swath of America.”
Crowe anticipates that mortgage rates will remain low, but that it will get harder to qualify for one. He said the days when “anyone who could fog a mirror” could get a mortgage are over and that the foreclosure epidemic will remain isolated to the states that have struggled with them the most over the past few years. He said 72% of foreclosures are isolated in a dozen states.
Crowe's forecast for single-family housing starts calls for a 17% increase in 2012 to 501,000 (after falling 9% in 2011) and a 37% increase in 2013 to 685,000. He expects multi-family starts to increase 17% to 208,000 and 13% to 235,000 in 2012 and 2013, respectively — healthy increases for sure, but nowhere near 2011's 56% increase. “We are starting 2012 pretty much with the same optimism as 2011, but the optimism wasn't fulfilled last year,” he said.