The National Association of Homebuilders hosted their annual NAHB International Builders’ Show this past week. David Crowe, their chief economist had an “optimistic” forecast for 2011:
NAHB Chief Economist David Crowe said job growth will provide a stronger stimulus in the housing market than 010’s home buyer tax credits. “This year’s spring selling season will be better than last year’s,” he said.
Crowe’s forecast called for 575,000 single-family home starts in 2011, up 21% over 475,000 in 2010, which in turn was up 7% from 442,000 in 2009.
Multifamily housing, poised to profit from a disproportionate number of Gen Y members entering the housing market, has seen the bottom of the cycle, Crowe said. He forecast starts to rise 16% in 2011 to 133,000 units, with a further 53% increase in 2012 to 203,000 units.
Homebuilders themselves however, do not share Crowe’s optimism. The NAHB announced today:
The NAHB said early Tuesday its confidence index, which measures builder perceptions of current single-family home sales and sales expectations for the next six months, came in flat at a reading of 16 in January, matching expectations according to consensus estimates listed on Briefing.com.
Any reading below 50 indicates poor sentiment. The index has not been above 50 since April 2006.
The index’s components include current sales conditions, sales expectations and traffic of prospective buyers. The first two components were unchanged in January at readings of 16 and 25, respectively, while traffic of prospective buyers edged up a single point to 12.
Here’s hoping Crowe is wrong. Adding more units to an already glutted market would be like throwing a bucket of water over your wood before trying to light the fire. Even an exceptional rise in demand this spring would not put a dent in the current supply.
Homebuilders will continue to build. Even in a bad market, for them, it’s build or die. It seems unlikely though that they will build at the level Crowe predicts.