The National Association of Homebuilders (NAHB) hosted its Construction Forecast Conference yesterday and it’s not a surprise, that the news was dismal.
“Things are a lot worse than any of us had anticipated six months ago,” said NAHB chief economist David Seiders in his opening economic forecast. “Who would have anticipated the turmoil in the financial markets that we’ve seen since September?”
He pointed out that the housing numbers continue to spiral downward and new home sales are still declining.
“I would say that the keyword for the day is risk,” he said. “The uncertainties out there are probably unprecedented and the degree of risk forecasted has probably never been higher.”
Before presenting his forecast he said it’s as much about risk as it is about forecasting.
“I’ve got the single-family starts hitting bottom early next year but then embarking on a gradual recovery process,” he said. “One of the things that is going to be plaguing the upswing is the tightening of the credit market.”
Regarding manufactured homes that forecast is dismal as well.
“I don’t really see any potential for growth in this market … but basically essentially dead in the water at less than 100,000 units per year,” he said.
The same is true for the remodeling market as Seiders said, “It is unquestionably weakening.”
“The pattern we’ve got for 2009 and 2010 is somewhat reminiscent of what we saw in the late 80s and early 90s recessions,” he added.
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While many economists argue whether or not the United States is in a recession, the next presenter Maury Harris, UBS U.S. chief economist, said “At UBS we started to say we’re in a recession back in January.”
He also pointed out that it’s obviously a poor environment for housing starts then gave his take.
“This year we have the starts at 940,000, next year at 780, 000,” he said.
Although he talked about other frightening facts such as rising unemployment rates he did leave attendees with some good news.
“One last thought is that yeah, the economics professions missed the severity of this crisis, but I’d like to remind people that just because we don’t know everything doesn’t mean we don’t know anything. We have the world’s experts on recession running the fed right now … I’m still sticking to that we’re going to find some solutions.”
When Michael J. Moran of Daiwa Securities America Inc. gave his housing forecast he said his forecast is already proving to be too optimistic (click here for his forecast. See slide 6 for housing start forecast)
“It’s proving to be too optimistic already on housing starts,” he said, then added, “This forecast does not involve a deep downturn.”
Bernard Markstein, NAHB staff vice president, also spoke about the R word as did some of the previous speakers.
“I think we’re all on the same page-when we’re through this it will be an official recession,” he said. “Yes, we’re in a desperate situation … At least we know when we land the economy will survive, but unfortunately not every enterprise will survive.”
He added that some of the measures taken by the government were a step in the right direction.
“We’ve seen that the policymakers, particularly the fed, have gotten together and done a lot of the right things, which will take time,” he said. “At some point, new home sales will get better …. We need to remember that it will get better.”
Seiders also echoed the sentiments of a national recession, but also spoke of a better time to come as we have all learned lessons from this crisis.
“I think we have learned something here and it’s very significant,” said Seiders. “I think this is so jarring that we’ll make some major changes. We’ll make mistakes, but I do think we’ll have a better system at the end of the day.”
For Seiders forecast slides, click here.