Maryland home builders expect a sluggish 2012 as joblessness and low consumer confidence have delayed a housing market recovery until at least 2013, according to experts at a forecast event held by the Home Builders Association of Maryland Thursday.
“We’ve had to shove out our recovery almost an entire year,” said David Crowe, chief economist for the National Association of Home Builders. “There’s a constant stream of these worrying concerns out there that has wrecked consumer confidence.”
Shocks caused by the federal debt crisis this summer, along with an economic crisis in Europe and continually high unemployment, have sidelined potential homeowners, even as home prices continue to stabilize.
Maryland’s economic recovery has been slow, said Anirban Basu, chairman and CEO of Sage Policy Group, in part because the state fared better in the recession compared to hard-hit states like Nevada and California. Because the local housing market has always been more stable, the impact has been softer, even as many Marylanders have had to forgo homeownership as they struggle for work.
“The downturn was not as profound, but the upturn was similarly squishy,” Basu said.
Mortgage rates are at historic lows, meaning prospective homeowners can get good value for their money if they can afford to buy. Luckily for Maryland home builders, resale inventory is also low, meaning that the state has relatively few unoccupied homes, perhaps foreshadowing demand for new construction in coming years.
But the market’s not there yet. Since 2006, Crowe said, new American households have almost exclusively been renters — not homeowners. Many want to own homes but can’t yet — and perhaps won’t be able to until at least 2014.
Using census and housing trend data, Crowe noted that the country should have about 2 million more households than its current 112 million total. Because of the recession, families have banded together under one roof. But these arrangements are temporary and could lead to a boom in household growth as the job market recovers.
“The real overall rabbit in the hat for the home building industry is demographics,” Crowe said.
Low interest rates and slight job growth indicate that the home market is improving, said Ken Wenhold, regional director for Metrostudy Corporation. Even so, the only true boost to the economy will come from consumer spending.
Basu noted that gross domestic product growth for 2011 is expected to be around 1.6 percent, far below forecasts by some leading economists. Growth for 2012 should be roughly equal, or perhaps a bit better, economists have said, as markets slowly gain strength and stability.
For home builders, this means that the worst is over, though full recovery may be years away.
“Will next year be another year of grudging progress toward equilibrium?” asked Basu rhetorically. “Yes it will.”