Are Builders building new houses now?

Hi Lesslie,

I’ve read that new housing starts are up a bit, but what is the prediction for the future building of new homes?

Ah, there are a lot of opinions about this. After Economists took part in a recent NAHB (National Assoc. of Home Builders) Construction Forecast Conference Webinar, Rismedia reported, it was apparent that the housing market is on the road to recovery. The ride won’t be easy however, as there are a lot of obstacles in the way.   Chief economist David Crowe noted that the “Home buyer tax credits clearly did their job and got people back into the marketplace”. 

There are however numerous factors that continue to affect housing starts at this time. These factors include:

  • the shortage of credit for new and existing properties
  • competition from short sales and foreclosures, and
  • regional economic discrepancies.
  • a reported delinquency rate of 10% on what were prime loans and ARMS

It is expected that multifamily housing starts may lose deep ground this year, declining up to 18%, before recuperating in 2011-2010.

While banks are telling us that credit is available, Builders are saying that credit is extremely tight.  The Fico scores required by FHA are higher than they were a year ago and it’s very difficult for a self-employed person to get a loan. 

Another prediction is that nationwide home prices will remain flat this year and should begin to post a decent increase in 2011. Mortgage rates will continue to remain low and should not exceed 6% even through 2011.

We all know that the most important thing about an improved housing market is a strong job market.  Until our unemployment figures decrease and new jobs are created, housing does not have a chance of coming out of the doldrums.   As has always happened in the past, housing will improve as the job market does. Mark Zandi, chief economist of Moody’s Analytics, predicts that the economy will average monthly job gains of around 50,000-125,000 by 2012. 

The critical factors that are improving the housing demand are jobs. “We’re not going to get home sales unless we have jobs.”        

It is expected that home prices will continue to decrease as a result of the high foreclosure rate and by the end of 2010 will be down by about 5%.

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