Residential Remodeling Sentiment Remains StrongMay 10th, 2012 by DWM Magazine
Good news for the fenestration industry: when it comes to home remodeling door and window replacements are near the top of the list—number three, in fact, following bathrooms and kitchen projects, according to David Crowe, chief economist for the National Association of Homebuilders (NAHB) who spoke during a remodeling market outlook webinar yesterday.
In opening his presentation, Crowe began with a look at quarterly data.
“The information [we’re] getting today is all over the place,” he said, noting that some is good and some bad. He said looking at the data over at longer period of time may give a clearer picture of what’s happening. According to Crowe, the last three quarters of total payroll employment data have continued to increase, while the last couple of months the data has not been as encouraging.
“My foundation for [this] forecast is that these couple months are an exception to the rule and simply some readjustment to extra growth,” he said.
Looking at unemployment data, though, he noted that this has been declining. One reason, however, is the fact that some people are just falling out of the market all together.
In terms of real gross domestic product, 2012 started OK, he said.
“Not great, but still above 2 percent growth, probably due in part because the last quarter of last year was somewhat better than expected,” said Crow.
The consumer confidence index has also seen improvement. Crowe said this is a critical component of the whole housing industry.
“If [people] can feel more comfortable about the future then other conditions in the market are conducive to growth,” he said.
Taking a look at single-family permits, these have seen very modest growth. “The weakest part of residential sector,” said Crowe, “but at least no decline.” He added that multi-family permits have seen significant growth since the middle of 2009.
But markets are local, he reminded listeners.
“House prices and house movement is so different one place to another,” said Crowe, explaining that the ratio of prices to income is an affordability measure and that ratio varies for different places. At one time, around 2005, Crowe explained, the house price-to-income ratio rose significantly in the whole country to almost five, meaning that across the country house prices were five times more than income.
“But now that’s back down to where it should be (around three), though not everywhere,” said Crowe. He explained that the elevation of mortgage distress is different all over the country. “There’s a little over eight month’s supply of homes in serious mortgage distress,” said Crowe. “It’s still a problem, in some states more than others.”
As far as what to expect in the future, Crowe said it will likely be a modest increase. So just what should the market expect? Crowe predicts single-family starts to be at half a million for the year, which he says is still extremely low; barely 1/3 of the way to recovery. Multi-family, though, will be much better. By 2013 Crowe expects to see 235,000 starts for the year, which he says is much closer to normal.
As for remodeling, Crowe noted that the NAHB remodeling market index shows sentiment has been up since 2011. His forecast is for continued increase: 12 percent this year and 8 percent next year.