Robert Denk, Assistant Staff Vice President for Forecasting and Analysis with the National Association of Home Builders gave a report to the National Sales and Marketing Council during IBS. He opened by saying, “Fear – there is lots of fear out there.”
Here are the highlights of his presentation:
National Housing Market recessions shows previous downturns, but this downturn is a historic low. This is a good representation of what is going on in Florida, California, etc. Not necessarily a good representation in what is going on in other markets. The height of the housing boom was unsustainable. Comparing ourselves to normal levels of production (2000 – 2003) versus the height of the housing boom, we are at 44-percent of production nationally. There are places at 70 to 80 percent of production, so it is not all bad news — agriculture states and energy states are doing well.
Markets are local, local, local. If your area is creating good paying jobs that is a fundamental of good housing market. You have to look at that to get a feel for where the market is going.
Exotic loan products that are generating foreclosures are certainly something we all have to pay attention to.
The unemployment rate, is at 7.2 percent. Michigan is approaching 10 percent.
Production was ahead of trend. Several years with 200,000 more homes being built than the trend.
Housing pricing, houses were at 3 to 3.5 percent times annual income. Peaked at 4.7 during the housing boom. Currently at about 3.6 percent. To get back to production we need to reduce inventory and stabilize prices. Not sure of where the floor is going to be. The lower cost of owning the house supports more people owning homes.
House prices are stabilizing. You can see from the chart the states that have the most work to do and the states that are within 10-percent of where they should be. House prices still need to come down relative to income.
Dallas market is looking pretty good. Not a big inventory problem and much more stable housing prices. The bottom line: Supply and Demand have to balance. 2009 will continue to be a rough year, but we are going to see improvement in 2010 and 2011. We may even over correct.