Housing recovery to occur in fits and starts
Momentum continues to build in the housing market as a result of positive views on housing demand and supply assumptions, according to JPMorgan Chase's (JPM) securitized report.
The big banking company projects 3.4% growth nationally in 2013, and 3% growth in 2014 and 2015, respectively. Home sales are also expected to climb to 5.1 million next year, outpacing an increase in housing inventory to 2.4 million, leading to 2.7 million in net demand.
Click on the chart to view projected home sales.
"Recent housing and economic indicators have been mixed. Both new home and existing home sales rose, net demand remained at high levels, housing starts jumped, and builders' confidence rose to the highest level since mid 2006. But the December payroll data offered little excitement, and mortgage applications point to potential weakness in future sales," Chase analysts said.
Although home prices typically weaken in the winter months, the CoreLogic index was up 0.1% in November, and up 7.2% from last year. Also, the S&P/Case-Shiller 20-city index and the Federal Housing Finance Agency purchase-only index rose 4.3% and 5.6%, respectively from the previous year.
However, the sluggish economy, tight lending standards and elevated shadow inventory will impede a steady housing recovery.
Fitch Ratings noted in its U.S. homebuilding/construction report that challenges — such as high delinquency levels, the potential for foreclosure acceleration and distressed sales — continue to weigh on housing.
Nonetheless, Fitch expects "stable" ratings for the homebuilding sector in 2013, which reflects a continued moderate improvement in the industry.
Single-family housing starts are expected to improve about 18% in 2013, while new homes sales should increase by 22% and existing home sales are expected to grow by 7%.
Average single-family new home prices improved an estimated 3.5% in 2012 and are expected to rise 3.8% in 2013.
"Attractive home prices, persistently low mortgage rates and a rise in nominal incomes results in superior affordability and valuations. Mortgage rates remain near their all-time recorded lows and housing appears more undervalued versus incomes than at any time in the past 35 years," Fitch analysts noted.
The major public homebuilders also reported growth in stock price performance and will continue to see solid growth in 2013.