WDMA Conference Kicks Off: Navigating the Road Back to NormalMarch 14th, 2011 by DWM Magazine
The Window and Door Manufacturers Association (WDMA) kicked off its legislative conference yesterday in Washington, D.C., and David Crowe, chief economist for the National Association of Home Builders (NAHB), told attendees what the “new normal” will look like for the housing industry.
“Recovery will be slow on the long road back to normal,” said Crowe.
“We finally started seeing growth in the fourth quarter of 2010,” he added.
However, Crowe pointed out that many factors typically occur following a recession in regards to housing and that, in this case, a few of those things are not happening. For example, vehicle and furnishing purchases are starting to pick up—but not housing.
“We usually see housing as the first thing to pick up but we’re not seeing this time,” he said.
Crowe also pointed out that typical housing growth following a recession is 28 percent.
“Housing is a crucial part of growth and it isn’t participating,” said Crowe, who forecasts growth in the 3.5-percent range for 2011.
But future job growth, particularly in 2012, will start to turn things around.
“By 2012 we will see enough job growth to be something called normal,” he said.
He also addressed household demand and this will be a factor in the eventual up tick in housing.
“There is only so long a 30-year-old can live in his mother’s basement,” said Crowe. “When that happens [children move out, etc.] things will pick up.”
However, at Crowe’s estimate the housing industry is under production by three million homes.
“If we get back to ‘normal’ we have a big correction to make,” he said.
“Things will get better,” Crowe added, and one thing that has to happen is for builders to get funding, which currently isn’t happening.
Foreclosures are playing a role as well.
“Foreclosures are still a big problem, but what I want to drive home is that they are regional,” said Crowe. “Seventy percent of foreclosures are in 12 states.”
Those states include Florida, California, Illinois, New York, New Jersey, Ohio, Arizona, Texas, Georgia, Michigan, Nevada and Pennsylvania.
“Some of those states are there due to their manufacturing base and some, Texas and Pennsylvania, are there purely due to their size,” Crowe said.
Crowe ended his presentation with some specific forecasts for housing starts.
He projects a 14-percent increase this year in single-family homes.
“By the end of 2012 we should be around a million starts, but that is still off,” said Crowe.
He pointed out that these new homes built in the new normal also will be smaller in size.
“Even if we build a million homes they are smaller,” said Crowe. “Builders are holding costs down because they are competing with foreclosures.”
For the multi-family segment, Crowe forecasts a 21-percent increase in 2011 to 138,000 from 2010 numbers of 114,00. He predicts 193,000 multi-family starts in 2012.