Builders group forecasts improved US home sales, construction this year, bigger pickup in 2013

LOS ANGELES, Calif. - The U.S. housing market will begin to mount a turnaround this year, building toward a solid recovery in 2013, according to a forecast issued Wednesday by the chief economist of a homebuilding industry trade group.

The outlook by National Association of Home Builders Chief Economist David Crowe calls for U.S. sales of new homes and single-family home construction to improve this year compared to 2011, when they hit record lows.

The forecast still leaves new home sales and construction well below the levels of a healthy housing market, however. That reflects the severity of the industry's downturn, and it suggests the housing market could be years away from full health.

"I'm looking at 2012 as sort of a ramping event to get a much more solid recovery in 2013," Crowe said in a telephone interview.

The economist, who presented his forecast at the trade association's annual conference in Orlando, Florida, sees sales of new, single-family homes climbing 19 per cent this year to 360,000, up from 303,000 last year.

Next year, he expects those sales to rise by a whopping 40 per cent to 505,000.

Even if the forecast proves true, that still leaves new home sales below the 700,000-a-year pace that economists say must be sold in a healthy economy.

Crowe's outlook also hinges on unemployment staying below 8.5 per cent and the economy adding more jobs. And he's assuming that tight mortgage-lending requirements will ease this year, enabling more homebuyers to qualify for financing.

Freddie Mac Chief Economist Frank Nothaft, who also issued a housing outlook at the NAHB conference, said he expects total home sales to grow between 2 per cent to 5 per cent this year, thanks in part to still-low mortgage interest rates. He anticipates the average rate on a 30-year mortgage will remain below 5 per cent this year.

Many economists are expecting a brighter year for housing, citing positive economic data in recent months. The nation's gross domestic product expanded slightly last year. The nation has been steadily adding more jobs. And the national jobless rate has fallen from 9 per cent as recently as September to 8.3 per cent last month.

Still, the housing market has to come up from the deep trench it sank to in 2011.

Last year was the weakest year for single-family home construction on record. And sales of new homes sank to the lowest level on records going back a half-century.

High unemployment, uncertainty over the economy and concerns that home prices could fall further kept many prospective home buyers on the sidelines. Others opted to buy cheap foreclosures rather than new homes.

While new homes sales represent a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the NAHB.

In 2011, builders began work on 606,900 homes. That was slightly better than in the previous two years, but only about half the number that economists equate with healthy markets.

Crowe's forecast calls for builders to break ground on 706,000 homes this year, an increase of 16 per cent. He sees that rising 27 per cent next year to 895,000.

Looking only at single-family homes, which account for roughly 70 per cent of the market, Crowe projects construction will be started on 499,000 homes this year. That represents a 16 per cent gain from last year. He anticipates a 32 per cent jump in 2013.

Sales of previously occupied, single-family homes improved slightly last year, rising to 2.7 per cent to 3.81 million. Crowe is expecting they will climb about 15 per cent this year to 4.38 million homes, and about 23 per cent next year to 5.36 million.