Home Building Recovery Predicted For 2010

Single-family construction is expected to be at the top of the list of new construction recovery by 2010

. Economists from Freddie Mac, IHS Global Insight and National Association of Home Builders all agree that new home construction will begin to recover by the third quarter of this year and increase dramatically into 2010.

Kermit Baker, chief economist for the American Institute of Architects (AIA), noted that the current state of the economy is sending mixed messages. Housing upstarts are up, but consumer confidence is down. He said that this is typical when nearing a turning point in the economy.

Construction of single-family homes was at an all-time low in January of this year, and figures only improved slightly through July of this year. According to Kenneth Simonson, economist for Associated General Contractors of America (AGC), the bottom fell out of the construction industry last September with a record number of layoffs. States hardest hit were those where housing construction was a primary means of employment.

States that were host to a housing boom suffered even more. Nevada, for instance, lost 23 percent of the state's construction employment; California lost 19 percent and Florida is down by 16 percent. Arizona suffered the most with 26 percent less jobs in construction employment. All these states were where job reduction was the result of the struggling housing market for home building businesses, along with the subcontracting companies that worked for them.

One economist forecasts growth in 2010 for new single-family starts will be in the range of 528,000 and multi-family starts will be 135,000. The thought is that construction spending will grow 10 percent in new single-family homes; although he cautioned that the construction climate will continue to resemble a recession for the next one-and-a-half years. Construction on approximately 375,000 single-family homes is expected to begin by the end of 2009.

If growth does continue on the upswing for new construction, then builders will have to prepare themselves and their wallets for increased material costs. For the remainder of 2009, however, it is anticipated that builders will continue to enjoy a period of reduced pricing.

Chief Economist for Moody's Mark Zandi predicts that the market will level out in the area of housing starts and that by the end of 2010 the numbers will return to 1 million units. That growth is anticipated through 2011. Based on the stabilization of the banking industry and adjusted consumer spending, Zandi anticipates the current economic recession to end sometime this year.

Simonson forecasts increases for overall building material costs to be between 6 and 8 percent, including concrete, asphalt, gypsum, copper, steel and all other applicable materials. Since materials for construction require physical transport, the industry is vulnerable to price volatility, transport schedule flux and fuel price changes.

As economists look into their crystal balls, it appears that there certainly is a consensus. The winds of change are on their way to bring improvement in the area of new construction and, more specifically, new single-family construction.

by: Ki Gray

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