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2012 Year End Reports, 2013 Forecasts Portend More Robust Housing Recovery

Written by on Wednesday, 26 December 2012 6:00 pm
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The housing recovery is picking up steam with year-end reports and forecasts for the New Year rolling in with ever more positive numbers.

Even with the seasonal trend of slower sales exacerbated by winter storms, November's existing home sales rose 5.9 percent over October and are 14.5 percent higher than sales in November 2011, according to the National Association of Realtors (NAR).

Meanwhile, the National Association of Homebuilders (NAHB) says 2012 will end with housing starts 23 percent higher than in 2011 and 2013 will usher in a 21 percent gain over 2012.

"We are transitioning from a very low demand level, where most people hold themselves out of the marketplace, to a case where supply will start being the problem," said David Crowe, chief economist for NAHB.

"Consistent, positive reports on housing starts, permits, prices, new-home sales and builder confidence in recent months provide further confirmation that a gradual but steady housing recovery is underway across much of the nation,” said Crowe.

NAR says existing home sales are at the highest level they've been since November, 2009.

The national median existing-home price for all housing types was $180,600 in November, up 10.1 percent from November 2011 and the ninth consecutive monthly year-over-year price gain, which last occurred from September 2005 to May 2006 - during boom times, NAR reported.

Home price pressure in both the new and existing home market is coming from a short supply of both traditional listings and distressed properties. Listings are 22.5 percent below last year's levels.

Foreclosures and short sales sold at deep discounts, 20 percent and 16 percent respectively, but together accounted for only 22 percent of November sales, down from 24 percent in October and 29 percent in November 2011.

New home builder confidence rising

In the new home sector, builders are puffing up with confidence. The NAHB/Wells Fargo Housing Market Index (HMI), which measures builder confidence in the single-family housing market, has posted gains for eight consecutive months and now stands at a level of 47.

That's near the midpoint of 50, where an equal numbers of builders view the market as good or bad. The HMI has not been above 50 since April of 2006.

Builders are confident about the growing number of improving markets . When NAHB launched the NAHB/First American Improving Markets Index (IMI) in September of 2011, only 12 metropolitan areas out of 360 were on the list.

By December this year, the list was brimming with more than 200 metro areas, nearly two out of three. The index is based on a six-month upswing in housing permits, employment and house prices.

Growing households are also boosting confidence. In the early 2000s, America was generating 1.4 million new households every year. The bust cut that by about two-thirds to 500,000. Right now, new households are formed at nearly 900,000 per year, according to NAHB.

Freddie Mac, however, recently released a forecast that projected household net growth at 1.20 to 1.25 million in 2013.

"We’re not up to normal, but this is adding to demand for housing," Crowe said.

Rental market shift

Not so fast, says Capital Economics.

The big winner in household growth will be the rental market .

"With the overwhelming majority of newly forming households over the next few years set to rent rather than own their home, the rental sector will be the disproportionate beneficiary," wrote Capital Economics economist Paul Diggle.

While the newly formed households will absorb demand for housing and homebuilding, Capital Economics says that a closer look at these newly forming households likely suggests the "rental sector will see the biggest boost from rebounding household formation. Nearly all newly forming households in the past five years have been renters," Diggle added.

However, a segment of renters bracing to take the homeownership plunge are adding to the rosy 2013 forecast.

More than one in three of today's renters, 31 percent, plan to buy a home in the next two years, a 9-point increase from 22 percent in January 2011, according to Trulia's American Dream survey.

Even though they came of age during the Great Recession, 72 percent of Millennials (18-34 year olds) say homeownership is part of their personal American Dream. Nearly all, 93 percent, expect to buy a home one day.

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  About the author, Broderick Perkins

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.