Homebuilders Cautiously Optimistic For Better Year In 2010

As the housing market appears to be bottoming out, many homebuilders are more optimistic about the possibility of an improved outlook for 2010. While experts still believe that …

As the housing market appears to be bottoming out, many homebuilders are more optimistic about the possibility of an improved outlook for 2010. While experts still believe that the near-term housing market outlook remains negative, current trends combined with the extension of federal homebuyer tax credits support analysts’ estimates that 2010 revenues for the homebuilding industry will be higher than 2009. See the following article from HousingWire for more on this.

The four-year-long decline in the housing market appears to have bottomed out in mid-2009 and industry players are more optimistic about their prospects for next year.

Fitch Ratings said pending home sales, existing home sales, single-family housing starts and single-family new home sales are showing general improvement after bottoming out earlier this year. The same holds true for new home inventories, home pricing and consumer and builder sentiment.

While Fitch maintains a negative outlook for US homebuilding in 2010, the John Burns Real Estate Consulting (JBREC) monthly builder survey showed optimism among 264 home building industry executives from public and private companies. The belief that builders will have increased community count, better orders and slightly higher prices has 57% of respondents planning for more revenue in 2010 than in 2009.

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According to the John Burns survey, average net sales per community declined to 1.4 nationally from 1.6 in the November survey. The average unsold, finished inventory per community increased to 3.3 units, up from a recent low of 2.8 units. JBREC said the increase in inventory may be a buildup for spring.

Fitch said it raised its forecast for housing starts and new home sales, but noted that expansion will be slow at first. “The continuation and expansion of the national housing credit should partially help offset expected seasonal declines during the winter months through the spring of 2010,” said Fitch managing director and lead US homebuilding analyst Robert Curran. “The federal government’s continuing efforts to moderate foreclosures may also show some success in 2010.”

Concurrently, John Burns’ survey shows buyers are less urgent to purchase now that the homebuyer tax credit has been extended into next spring. Builders believe demand will pick up when the new deadline gets closer. “At this point, it’s clear that the extension and expansion of the tax credit weren’t enough to drive demand through the seasonally slow time of the year,” said JBREC vice president Jody Kahn.

Builders go into next year with enhanced cash flow, Fitch said, funded by recent debt offerings, large land sales, tax refunds, and public equity offerings.

“Recently passed legislation that extends the net operating losses (NOL) carryback to offset taxable profits from the previous five years will result in meaningful tax refunds for most public homebuilders early in 2010 further enhancing liquidity and tangible net worth,” Fitch said.

This article has been republished from HousingWire. You can also view this article at
HousingWire, a mortgage and real estate news site.


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