By Mike Colpitts
A group of leading U.S. economists forecast broad improvements in the nation’s economy, real estate capital markets and the housing market through 2014. The projection was issued after the Urban Land Institute surveyed economists for its new real estate consensus forecast.
The survey of 38 economists across the country, found that 2012 may mark the beginning of a turnaround in the housing market. Single family home starts, which have hovered at record lows for three straight years, are forecast to reach 500,000 homes in 2012 and reach 800,000 units by 2014.
The forecast echoes Housing Predictor forecasts issued earlier this year. Some isolated markets in the Mid-West, including Kansas, Iowa and Nebraska cities are already showing signs of improvement.
The average U.S. home price is projected to stop declining this year by economists who were surveyed, increasing by 2% in 2012 and reach appreciation on average of 3.5% in 2014. The forecasts are considered highly optimistic by many analysts specializing in the housing industry, but provide a promising picture for the nation’s housing market, which has seen home prices decline in most regions for more than five years.
The big one unknown factor in the housing market’s recovery is consumer confidence, according to Peter Linnenan, who is the CEO of the American Land Fund. “That goes to an underlying confidence issue that goes to the consumer and is in the business sector,” said Linneman.
The oversupply of foreclosed homes in the hardest hit cities is anticipated to slow the housing recovery. However, economists contend that improving employment and strengthening consumer confidence will attract buyers back to the housing market.
Improving spring time home sales in many regions of the country are already demonstrating a better market. “All the data coming in shows a modest recovery,” said Kenneth Rosen, Ph.D., chairman, Rosen Consulting Group, Berkeley, Calif. “This is not a boom. There’s no other big shoe to drop.”
Near record low mortgage rates are making it attractive for home buyers, but Rosen cautions that the market could suffer a blow, “If interest rates move up from zero to say 3 or 4 (%).”
The projections are a consensus of estimates based on the economists surveyed. The results indicate real gross domestic product (GDP) is expected to rise from 2.5% this year to 3% next year, and that unemployment, which currently averages 8.3% across the U.S. should decline to 8.0% later this year and drop to 6.9% by 2014.