Lawler: Housing Forecast for 2012

Lawler: Housing Forecast for 2012

by CalculatedRisk on 1/19/2012  

From economist Tom Lawler:

At the beginning of 2011, the “consensus” forecast for total housing starts was in the 690,000 to 700,000 range, with most analysts looking for an increase in both Single Family (SF) and Multifamily (MF) starts. Early last year one well-respected analysts who regularly surveys SF builders said that on average builders planned to increase SF starts by 15-20% in 2011. As I noted at the time, however, such an increase seemed highly unlikely given new and existing inventories, distressed sales, and pricing relative to where builders were willing to sell homes. It turned out, of course, that new home sales in the early months of last year were “quite disappointing” in aggregate, and builders in aggregate quickly changed their “plans.”

MF starts, in contrast, exceeded “consensus” forecasts, as the combination of very low completion rates (completions lag starts considerably), a moderate rebound in household growth, and a shift toward more renters than buyers (both voluntary and involuntary) resulted in a sharp reduction in apartment rental vacancy rates, as well as rising rents.

While the labor market has shown some signs of improving, household growth is highly likely to be faster in 2012 than 2011, active government intervention has pushed mortgage rates to yet new lows (AND with a record low “handle”), new and existing home inventories are down significantly from a year ago, last year’s subdued housing production helped further reduce the “excess” supply of housing, and last year’s SF activity was still depressed by the earlier and ill-conceived home buyer tax credits, this year’s “consensus” forecast for housing starts in 2012 appears to be lower than last year’s forecast for 2011 – especially on the SF side!

Quite frankly, that doesn’t seem to make a lot of sense to me.

So … just like a year ago I thought the consensus forecast for housing starts was too high, this year I believe it is too low.

Right now, my “best guess” for housing starts, new SF home sales, existing home sales, and housing completions, would be as follows.

Housing Starts and Home Sales (000s)
Housing Starts Single Family Multifamily (2+)
Total Built for Sale SF Built for Sale MF Built for Sale New SF Home Sales Existing Home Sales
2010 587 321 471 306 116 15 323 4,182
2011 607 315 429 295 178 20 305 4,272
2012(F) 740 385 515 360 225 25 365 4,550

Note: My 2010 existing home sales numbers is the sum of the NAR’s NOT SEASONALLY ADJUSTED sales figures from its re-benchmarking release. In the past the NAR’s annual number always “footed” to the sum of the NSA numbers, but that was not the case when it released its benchmark revisions.

And for completions in 2012:

Housing Completions (000s)
Housing Completions Single Family Multifamily (2+)
Total Built for Sale SF Built for Sale MF Built for Sale Mfg. Housing Placements Total
2010 652 362 496 331 155 31 50 702
2011 584 309 445 294 139 15 46 630
2012(F) 635 359 470 340 165 19 60 695

CR Note: The following table shows several forecasts for 2012:

Some Housing Forecasts for 2012 (000s)
New Home Sales Single Family Starts Total Starts
Merrill Lynch1 304 427
Fannie Mae 336 473 704
Wells Fargo 350 457 690
John Burns 359 717
NAHB 360 501 709
Tom Lawler 365 515 740
Moody’s 530 687
1 Merrill’s forecast is “sideways” in 2012
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