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NAHB Waiting for Residential Rebound in 2010

While home builders are in for some scary times over the next 18 months to 24 months, the horror show in the residential market should end in 2010, according to several economists at the 2008 Fall Construction Forecast held by the National Association of Home Builders (NAHB) on Oct. 22 in Washington, D.C. David Seiders, NAHB's chief economist, expects single-family housing and total housing starts to drop 17.7 percent and 21 percent, respectively, in the first quarter of 2009 before starting to increase from a very low level. By the end of 2009, barring any further unforeseen economic surprises, he expects to see 835,000 total housing starts. This is up from the 785,000 total housing starts he has estimated for 2007, but well under the level of housing starts the homebuilding industry enjoyed in the boom years of 2005-2006.

At several of the NAHB forecast meetings held during the go-go years of the housing market, Mark Zandi, the chief economist for Moody's, was often the lone economist with a bearish outlook for the fortunes of home builders. While other economists at those meetings often talked about sustainable demand for the record levels of residential construction, Zandi warned attendees about housing bubbles and the dangers of no money-down mortgages and other financing schemes. As things turned out, his forecasts came closer to today's reality than those of other economists at those NAHB gatherings. While his assessment of the current situation in the housing market was grim, he said that after this shakeout, several market drivers will kick into gear that will support a comeback in 2010. By that time, Zandi expects builders to work off the current housing inventory. Other drivers will include more affordable homes as measured by the price-income ratio and low interest rates for mortgage loans.

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