Posted on January - 17 - 2011
Slower New Home Recovery Seen
A leading real estate analysis firm has scaled back its forecast for a recovery in the market for new homes, pushing back projected recovery dates in most of the markets it surveys.
In its January 2011 outlook for the U.S. housing market, the Concord Group pushed back its predicted date of recovery in new home sales by at least one quarter in 10 of the 16 metropolitan markets it analyzed, compared to its previous study two quarters ago. None of the markets were given improved forecasts, while the predicted recovery in one market, Santa Clara, Calif., was pushed back two quarters, to the fourth quarter of 2012. Overall, a recovery in the national market in new home sales is predicted by the end of 2012, with sales growth in the single digits. Areas with low inventories of new homes and rising employment could see a recovery by the end of this year, while metropolitan areas with high levels of foreclosures and lagging employment may not begin to recover until as late as 2015, according to the forecast. The firm foresees a long-term demand for 800,000 new homes per year or more, based on demographic terms, but cautions it does not foresee a return to that level for at last 24 months. It notes that new home sales are believed to have totaled only 360,000 units in 2010, one quarter of the total at the peak of the market a few years earlier. The analysis looks at 16 metropolitan markets, predominately along the West Coast, and breaks them into three tiers based on new housing supply and market outlook. Three California markets – Orange County, San Diego and San Jose – were rated as Tier 1, with new home sales recoveries expected in early to mid-2012. Markets with more diversified economies that avoided the extremes of the housing bubble, yet with moderate housing oversupply, were rated Tier 2, with sales recoveries predicted for late 2012/early 2013. Metropolitan areas in this category were Dallas, Denver, Orlando, Raleigh, Riverside/San Bernadino, Sacramento, Santa Clara, Seattle, Tampa and Washington, D.C. Tier 3 markets were those with predictions of slow employment growth, high foreclosures and excess housing inventory, with sales recovery forecast for 2013 or later. Las Vegas, Phoenix and Coachella Valley (Calif.) were in this group, with a sales recovery in Coachella Valley not foreseen until late 2015.
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