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New Home Sales Expected to Improve 354 Views :: 0 Comments :: :: Real Estate, Market Analysis The National Association of Home Builders predict a gradual recovery following further erosion during this years first quarter Of the Texas Gulf Coast Markets, only Galveston posted gains in the 1st Quarter compared to the same time period last year. The Corpus Christi market was flat and South Padre Island sales dropped sharply. See our market conditions analysis for details at http://www.texasgulfcoastonline.com/sales.aspx. It is only a matter of time before housing begins to recover from its first major downturn in about 15 years, said industry economists speaking last week at the International Builders' Show in Orlando, Fla., and fundamental improvements in the marketplace could already be taking hold by this year's second quarter. "We knew we were in a correction process a year ago, and it was an inevitable occurrence following the unsustainable boom years of 2004 and 2005 when stimulative financing conditions and speculation from escalating home prices resulted in a 'grossly overheating market,'" said David Seiders, chief economist for the National Association of Home Builders (NAHB). "Indeed, the downward movements in sales and starts were even deeper in 2006 than expected." Even though Seiders said that he expects starts to begin a "gradual recovery" following further erosion during this year's first quarter, total housing production for 2007 is projected to slip a further 14.2 percent to 1.560 million, and single-family starts for the year are expected to decline 15 percent to 1.256 million. New single-family home sales were down 16.4 percent in 2006 but apparently stabilized by the end of the year. Sales are projected by NAHB to decline only 1.3 percent in 2007 as activity rises gradually during the year. Supporting an upward turn in new home sales, Seiders said, is today's "Goldilocks economy," which appears poised to sustain healthy levels of growth in Gross Domestic Product, jobs and income while core inflation recedes from levels that have been worrisome for the Federal Reserve Board. "The interest rate structure should be supportive of housing throughout this year," he said. While housing should be moving up before long, Seiders cautioned that it will be a couple of years before the industry reaches the 2 million annual construction pace (including 150,000 manufactured homes) that is sustainable over the long haul, the result of serious overbuilding during 2004 to 2005. Agreeing that the housing market probably has seen the worst of the current slump in starts and sales, David Berson, chief economist of Fannie Mae, and Frank Nothaft, chief economist of Freddie Mac, said that they don't expect to see the beginning of an upturn materialize until a quarter or two behind Seiders' forecast, with gradual improvement likely in this year's second half. The housing affordability woes that reduced housing demand last year now seem to be bottoming out as incomes rise, home prices moderate and mortgage interest rates remain at favorable levels, said Berson, and he further noted that housing demand won't be a negative for the industry this year, and could be a small positive. "There is still a bit of a rocky road and bumps ahead of us," said Nothaft, but builders "are seeing some light at the end of the tunnel." High housing prices have become the decisive factor behind the slowdown, he said, and "it will take time for affordability to improve." Nothaft added that national data have obscured local trends and there are some markets where home sales and price appreciation are "holding up well," particularly in much of the South. On the other hand, some markets - such as California, Florida and Massachusetts - have seen their business erode by 30 percent. While single-family activity will improve as the year progresses and into 2008, "we won't see a recovery in areas where the local economy is in recession," Nothaft said, such as Detroit and parts of the Midwest. ABOUT NAHB: The National Association of Home Builders is a Washington-based trade association representing more than 235,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. Known as "the voice of the housing industry," NAHB is affiliated with more than 800 state and local home builders associations around the country. NAHB's builder members will construct about 80 percent of the more than 1.56 million new housing units projected for 2007. Contact: Paul Lopez 202-266-8409 plopez@nahb.com www.nahb.com