The National Association of Homes Builders (NAHB) released various statistics related to the housing market last week proving that while the industry is showing signs of optimism, challenges still lie ahead.

First, nationwide housing production fell four percent in December to a seasonally adjusted annual rate of 557,000 units, according to data released last week by the U.S. Commerce Department. Meanwhile, permit issuance, which can be a future sign of housing activity, rose 10.9 percent last month to a seasonally adjusted annual rate of 653,000 units.

Single-family permits rose 8.3 percent to a seasonally adjusted annual rate of 508,000 units in December while multifamily permits were up 20.8 percent to 145,000 units.

But the NAHB added that improvements will come slowly as high unemployment levels.

NAHB is forecasting 697,000 total housing starts in 2010, up 25.6 percent from an estimated 555,000 units last year. However, this year’s recovery will occur entirely in the single-family sector, where starts are forecast to rise 37.7 percent from 443,000 last year to 610,000, he said. Suffering from an acute shortage of available financing, multifamily starts are expected to lose further ground in 2010, slumping to 87,000 units, down 22.3 percent from last year’s 112,000 level. In 2008, 285,000 multifamily units were started, which is near the level that is needed to keep the supply in balance with demand.

The NAHB also reported that apartments will be in short supply due to the credit crisis.

“We desperately need lenders to begin financing apartment communities again,” says NAHB chief economist David Crowe. “The vacancy rate for apartments is elevated now, but as the economy recovers and jobs return, the people who’ve been doubling up with relatives and friends will want a place of their own – and there may not be one available.”

Industry experts expect demand to outstrip current supply by mid-2011, with increasing shortages of rental housing through 2014. This is very likely to increase market-rate rents as much as 8 to 10 percent per year in 2011 and 2012, and by 4 to 7 percent per year thereafter through 2015.

Finally, the association reported that builder confidence has declined in January.

“At this point, home builders have done everything we possibly can to set the stage for a housing recovery – we’ve thinned our inventories, we’ve kept new construction to a minimum, and we’ve fought for and achieved a great new buying incentive with the extension and expansion of the home buyer tax credit,” says NAHB chairman Joe Robson, a home builder from Tulsa, Okla.

“We stand poised and ready to deliver new homes as soon as our customers are ready to take advantage of the tax credit and other historically good buying conditions in terms of interest rates, selection, and prices,” he adds. “Yet builders also realize that factors beyond our control – including consumer concerns about job security and competition from foreclosed homes on the market – are still impeding demand for new homes at this time.”

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