My take: 2013 forecasts from the experts

Home Editorials My take: 2013 forecasts from the experts

Volume 26/Number 22; March 18/25, 2013

We hear it wherever we have been over the last year: The market is coming back. But, the truth is it doesn’t matter what we hear. What matters is whether you are seeing and feeling it. Most retailers and manufacturers have reported everything from a strong fourth quarter to “the strongest December we have ever had” to five months of year-over-year growth.

For years we listened to projections that suggested business was certain to return to an upward trajectory. But 2013 feels different. The numbers support the recovery. So, against this backdrop, here are some forecasts that suggest good times are knocking on the door, if not already arrived.

 

 

Housing starts (single-/multi-family)

2013 Forecast: 940,000

Source: NAHB

You may think NAHB is the eternal optimist, but look at this: In late 2011, NAHB’s 2012 forecast called for 709,000 housing starts. It was actually 10% under the actual full-year figure of 780,000 as reported in January 2013 by the U.S. Census Bureau.

The NAHB forecast for 2013 is a 21.5% increase to 940,000 starts. Single-family starts are expected to increase 22% to 535,000.

NAHB’s optimism is supported by its homegrown metric known as the Improving Markets Index. The association defines an “improving market” as one that shows growth for at least six months in all three of the following: single-family building permits, home prices, and employment. By NAHB’s tally, there were 12 markets that made the list when the measurement was introduced in September 2011. In January 2013, there were 242 markets.

Home prices

2013 forecast: 2% to 3% increase

Source: Freddie Mac

Nationwide, home prices are expected to rise 2% to 3% in 2013, according to Frank Nothaft, chief economist at Freddie Mac. The median sale price of new houses sold in December 2012 was $248,900, up from $245,600 in November, according to the U.S. Census Bureau. The average sale price was $304,000, up from $289,900 in November.

But home price stats can be misleading. At the peak, a $300,000 house that lost 66% of its value fell to $100,000. The same house that gains 20% will sell for $120,000.

Factoring into those sales will be historically low mortgage rates that Nothaft said will stay below 4% through the end of the year for a 30-year, fixed rate loan.

Retail sales

2013 forecast: up 3.4%

Source: National Retail Federation

Not counting automobiles, gas stations and restaurants, the National Retail Federation (NRF) predicts 3.4% growth for store sales in 2013. But NRF president and CEO Matthew Shay isn’t celebrating. That’s because the pace of growth is expected to slow from last year’s 4.2% figure. Higher tax rates encroaching on disposable income is one of the primary culprits.

Remodeling activity

2013 forecast: double-digit growth

Source: Joint Center for Housing Studies

The Joint Center for Housing Studies at Harvard University uses the phrase “accelerating double-digit growth” to describe remodeling in 2013. Sounding a note of cautious optimism is Kermit Baker, the director of the Remodeling Futures Program at the Joint Center. “There are many external economic and political risks that could derail this remodeling recovery. However, the solid momentum behind home-building activity, existing-home sales, low financing costs and remodeling contractor sentiment all point to solid home improvement spending.”

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