Research Firm Projects Steady Increase In Home Construction In 2010

The first time homebuyer tax credit helped initiate new housing starts through the summer, but as the incentive comes to a close it could slow home construction. Although …

The first time homebuyer tax credit helped initiate new housing starts through the summer, but as the incentive comes to a close it could slow home construction. Although some remain optimistic that new starts will rise in 2010, undervalued foreclosed homes may saturate the market and further cripple the home construction industry. See the following article from HousingWire for more on this.

While housing start projections for 2009 are down 37.9% from the same period of 2008, research firm Metrostudy expects steady increases in construction starts next year.

Metrostudy expects a total 562,000 housing starts for 2009, down 37.9% from 2008. That includes 438,000 single-family starts, which are down 30% from 622,000 in 2008.

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Housing starts increased over the summer, in part due to an increase in demand created by the first-time homebuyer tax credit and a decline in speculative home inventory, said Brad Hunter, Metrostudy’s chief economist and national director of consulting. But, he added, banks are cutting off builder lines of credit, and in some markets, prices are too low for builders to turn a profit.

“We believe that some of the recent gains in housing starts could be given back during the third and fourth quarters of this year if the current tax credits are not extended,” Hunter said. “That said, the forecast for 2010 is for steady increases in starts.”

Metrostudy also reported that homebuilders’ sales and traffic are up, and “traffic quality,” the measure of shoppers touring builder models who actually purchase a new home is also improving, and some builders are experiencing their best sales paces in more than two years.

But the threat of a new glut of foreclosed homes entering the market poses a serious risk for builders, Metrostudy warned, as a wave of properties at distressed prices could impact new home sales.

Metrostudy’s data is compiled from 256 counties in 82 metropolitan statistical areas (MSAs). The US Department of Commerce is expected to release its own housing starts data Tuesday. Hunter expects that data to show an increase in September starts for single-family homes, but a decline in multifamily starts.

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