New home outlook
The National Association of Home Builders is projecting a first-ever overall decline in housing prices for 2007. Despite a pick-up in demand and a projected increase in housing starts by the second quarter, NAHB Chief Economist David Seiders is calling for a "modest downward" correction in prices this year on a national basis.
"Sales activity has bottomed out already," Seiders said at the NAHB's annual convention in Orlando earlier this month. "But we've got one heck of an inventory overhang."
David Berson's outlook hasn't changed at all since a press briefing in January, when the Fannie Mae economist said the market is in the home stretch. He said there a still a few bumps in the economic road, but the worst is in the rear view mirror. "I don't think we're quite at the bottom point," Frank Nothaft agreed. "There's still a little room for the market to weaken."
Seiders of the NAHB said the large supply of standing inventory of both new and existing houses could be underestimated by 100,000 units because they were sold to investors who failed to close. The deals are counted as sales by the Census Bureau, but are not erased when they fall through. The result, Seiders said, is "an extra source of supply without any corresponding demand." Overall, he added, the new home market is "overbuilt by at least 400,000 units."
The economist expects production to increase in markets not saddled with huge inventories, leading to an overall increase in starts. But he expects "the weight of the inventory overhang" to exert downward pressure on overall house values "for some time." If prices do, in fact, move lower this year, it will be the first time they have done so since the Great Depression, he pointed out.
Seiders also reported that widespread cuts in house prices and deepening sales incentives have brought consumers back into the market. According to the NAHB's proprietary monthly survey of 30 large builders, which account for about 25 percent of all new home sales, cancellations have declined, leading to "slight improvements" in net sales and closings.
Other builder surveys show that traffic to new home communities is picking up, which, along with reports from the Mortgage Bankers Association that purchase money applications are on the rise, "also supports the proposition that housing demand has stabilized," the economist added.
Even if sales are solidifying, Berson said, it will be some time before they outpace production numbers and prices start to rise again. "It's the unsold inventory that has caused prices to drop, and most of that has to be sold off before prices can go back up," he said.
"Sales activity has bottomed out already," Seiders said at the NAHB's annual convention in Orlando earlier this month. "But we've got one heck of an inventory overhang."
David Berson's outlook hasn't changed at all since a press briefing in January, when the Fannie Mae economist said the market is in the home stretch. He said there a still a few bumps in the economic road, but the worst is in the rear view mirror. "I don't think we're quite at the bottom point," Frank Nothaft agreed. "There's still a little room for the market to weaken."
Seiders of the NAHB said the large supply of standing inventory of both new and existing houses could be underestimated by 100,000 units because they were sold to investors who failed to close. The deals are counted as sales by the Census Bureau, but are not erased when they fall through. The result, Seiders said, is "an extra source of supply without any corresponding demand." Overall, he added, the new home market is "overbuilt by at least 400,000 units."
The economist expects production to increase in markets not saddled with huge inventories, leading to an overall increase in starts. But he expects "the weight of the inventory overhang" to exert downward pressure on overall house values "for some time." If prices do, in fact, move lower this year, it will be the first time they have done so since the Great Depression, he pointed out.
Seiders also reported that widespread cuts in house prices and deepening sales incentives have brought consumers back into the market. According to the NAHB's proprietary monthly survey of 30 large builders, which account for about 25 percent of all new home sales, cancellations have declined, leading to "slight improvements" in net sales and closings.
Other builder surveys show that traffic to new home communities is picking up, which, along with reports from the Mortgage Bankers Association that purchase money applications are on the rise, "also supports the proposition that housing demand has stabilized," the economist added.
Even if sales are solidifying, Berson said, it will be some time before they outpace production numbers and prices start to rise again. "It's the unsold inventory that has caused prices to drop, and most of that has to be sold off before prices can go back up," he said.
posted by Ken Calhoon at 7:43 AM
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