Predicting the behavior of the housing industry is notoriously difficult – even Warren Buffett just conceded failure in that area of economic foresight – but as Bloomberg reports, there have been quite a few signs in the last couple months that point to, at the very least, the beginning of a recovery in housing, one that could positively contribute to the U.S.’ gross national product for the first time since 2005.
Peter de Bruin, an economist at ABN Amro Group Economics in Amsterdam, said that a long-run recovery for housing is certainly in the works.
“There are definitely green shoots in the housing market, no argument about that,” de Bruin said. “Housing will contribute modestly to recovery this year and we will see a sustained recovery in 2013” that probably will continue through 2015.
Among the positive stats in the last couple are: existing home sales reached their fastest pace in 20 months; homebuilder confidence is at its highest level since 2007; housing starts, when including the flourishing multifamily sector, were up 1.5 percent in January, and total new housing units could grow by as much as 23 percent in 2012, year-over-year; and, perhaps most promising of all, banks may be finally loosening their purse strings.
Regarding the latter development, which has been among the holy grails in housing the last couple years, Federal Reserve data from November reported that banks had eased standards on prime and non-traditional loans in 2011′s third quarter for the first time since 2007. Barry Rutenberg, the chairman of the National Association of Home Builders, said in the Bloomberg piece that such data could be th start of something big.
“We are seeing early signs of the banks being willing to come back on a very selective and limited basis,” Rutenberg said. “We are starting to see it loosen up just a little bit. This is the very beginning of this. Let’s not get carried away with euphoria. It is generally loosening up.”
Dean Maki, chief U.S. economist at Barclays Capital Inc. and a former Federal Reserve researcher, was also quoted by Bloomberg speaking to the reality of a slow, but positive, growth in housing.
“The trend is up, not down,” Maki said. “That is a big change from where we’ve been over the last several years. So I don’t think we’re going to get to a point over the next year or two where homebuilders and others think these are really good times in the housing market. We’re a long way from that. But what we are seeing is some improved trajectory.”
So predominant has the good news on housing been that its even led to some positive speculation on Wall Street. Bloomberg pointed out that S&P’s 1500 Homebuilding index is up 17 percent this year on projections that new home sales will rebound in 2012 and boost the earnings of homebuilders, nearly double the gains for S&P’s general 500 index.
“The bottom is behind us,” said Paul Dales, an economist with Capital Economics Ltd. in London. “I don’t think we will return to anything like the exceptional booming market we had five years ago. We will have a very steady, slow recovery but a recovery nonetheless.”