by CalculatedRisk on 1/01/2012
One plus in 2011 was that residential investment made a small positive contribution to GDP growth for the first time since 2005 (mostly due to apartments). And construction employment probably added a few jobs in 2011, for the first time since 2006.
Now there is a growing consensus that new home sales and housing starts will increase in 2012. I think a small increase is likely, even with the large number of distressed homes, and I will be writing about the reasons soon.
Here is a forecast from Wells Fargo Friday:
“Even with continued worries about competition from foreclosure sales, we expect single-family construction to rise 7 percent in 2012. Sales of new homes should rise nearly 15 percent. Strong demand for apartments should help boost multi-family starts by at least 25 percent in 2012. Overall starts should rise to 690,000 units, which would be the best year since 2008.”
From Goldman Sachs:
“We believe that housing starts have probably bottomed already, while nominal house prices are likely to bottom in the course of 2012.”
And Doug Duncan at Fannie Mae is forecasting new home sales of 322 thousand in 2012.
A 15 per cent increase for new home sales would be to about 350 thousand. That would help, but it would still be third worst year since the Census Bureau started tracking new home sales in 1963. Doug Duncan’s forecast of 322 thousand would be the 2nd worst year since 1963. Here are the worst years:
|Worst Years for New Home Sales|
Sales were really low in 1981 and 1982, and then bounced back strongly in 1983 to 623 thousand. That will not happen this time because the dynamics are very different – interest rate had been very high in ’81 and ’82 and declined sharply in ’83 to 13%. And there wasn’t a huge backlog of distressed homes in 1983. So don’t expect a huge increase for new home sales, but we might see some increase in 2012.