The National Association of Home Builders went out on a limb late last week and called a bottom for housing in 2008, with NAHB chief economist David Seiders saying he expects to see a “modest recovery” for most U.S. housing markets in 2008. From the press statement:
With the housing sector facing a large backlog of unsold inventory, Seiders said that starts and permits won’t begin to move forward until sales firm up. â€œHome sales should bottom out by the end of the first quarter of 2008, and I have starts up in the third quarter of next year, assuming the inventory overhang stabilizes,â€? he said … NAHB is forecasting 828,000 new single-family home sales for 2007 and 781,000 next year, a 5.6 percent decline. Seiders noted that the peak-to-trough decline in home sales from the boom years of 2003-2005 is more than 40 percent, and as sales begin to move slowly upward beginning in the second quarter of next year, they will still only be on par with levels recorded in the late 1990s. Total housing starts are expected to register 1.363 million in 2007 and 1.2 million next year, an 11.9 percent decline according to NAHB projections. Single-family starts, Seiders said, are expected to show a 50 percent decline from their peak in the first quarter of 2006 to a trough in next year’s second quarter.
Seiders and the NAHB have good reason to hope for a recovery soon; should such a recovery fail to materialize, the trade organization is very likely to see its member ranks decimated during 2008. Interestingly, the NAHB is more bullish on housing than the agencies that rate its own constituents. Moody’s Investors Service downgraded the debt ratings of builders Lennar, Pulte and Centex to junk in October on the expectation that any recovery in 2008 is unlikely. Moody’s said at the time that it did not expect to see housing recover before 2009 “at the earliest, with any recovery likely to be very measured at first, thus prolonging the companies’ underperformance on key financial metrics vs. prior expectations.”