An Improving But Fragile Housing Market


Testifying before the Senate Banking Committee yesterday, NAHB’s Chief Economist David Crowe reported on the state of the nation’s housing markets and urged caution on housing policy issues. These issues include finding definite solutions to the issue of the Government Sponsored Enterprises (GSEs), preserving the housing tax rules, including the mortgage interest deduction (MID), and implementing the Dodd-Frank financial reform law, including the definition of a qualified residential mortgage (QRM) for the law’s risk retention rules.

For the long-term health of the home building industry, Crowe also discussed in his testimony and in a question-and-answer session with Senators the importance of unblocking the the Acquisition, Development and Construction (AD&C) lending channels for home builders seeking to build in markets where demand for new housing exists.

Crowe pointed to several factors indicating that the housing market should show modest improvement in the coming months: an improving economy and continued employment growth, low mortgage rates, stabilizing home values and three years of below-trend household formation rates that has created 2.1 million households of pent-up housing demand.

NAHB expects new-home sales will post a modest gain of 8 percent to 347,000 units in 2011 followed by a more substantial increase of 49 percent next year to 516,000 units.

Single-family housing starts will follow a similar trend to home sales, with an increase of 15 percent this year and 47 percent in 2012, which will raise the pace of single-family starts to 900,000 units by the end of next year. While a significant boost over current depressed levels, Crowe noted this is still 40 percent below NAHB’s estimate of the long-term sustainable trend, based on demographics, replacement needs and second-home demand.

Multifamily housing starts, which have experienced great volatility in recent months, are projected to increase 21 percent in 2011 and 40 percent in 2012, rising to 210,000 units in the fourth quarter of next year, which is still 38 percent below NAHB’s estimate of the long-term sustainable growth.

Statement for the Record: NAHB Senate Banking Committee Statement

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