Portland Cement Association Report: Homebuilders have little incentive

According to a recent report by the Portland Cement Association, homebuilders are unlikely to accelerate construction activity until two critical conditions are met — low inventory levels of unsold new homes and stable or rising home prices. “Currently, with housing prices fluctuating and new foreclosures coming on the market every month, homebuilders have no guarantee of a adequate return on investment,” PCA chief economist Ed Sullivan said in a press release.

“And there is little to suggest that this will change in the near future.” Tepid increases in residential construction activity are expected to materialize during the latter half of 2010, with more substantive gains expected in 2011 and beyond. PCA’s fall forecast projects a 14.4 percent increase in housing starts during 2010 compared to extremely depressed 2009 levels.

This reflects a 20 percent increase in single-family starts and a 5.7 percent decline in multifamily starts. These projections lie well below the consensus of construction economists’ expectations. Sullivan said federal tax credit programs artificially inflated the recent improvement in home sales and there is the potential for a significant sales payback during the second half of 2010. Additionally, slow job growth is expected to hinder housing sales during the second half of 2010, as will continually tight lending standards. It is also likely that foreclosure activity may accelerate during 2010.

This, combined with increased bank possession rates, suggests potential significant additions to existing inventories. The combined increase in properties for sale and bank-possessed discounted properties could stall home price increases, Sullivan said. Unlike the construction economist consensus, PCA believes that the potential for slower-than-expected sales, higher-than-expected inventories, and a weaker-thanexpected pricing environment suggest a delay in homebuilders reaching the trigger-point signal to accelerate single-family homebuilding.

www.cement.org

Got more questions about your project?

  • Drop files here or
    Accepted file types: jpeg, jpg, gif, png, pdf, Max. file size: 50 MB.
      Allowed formats: jpeg, jpg, gif, png, pdf
    • How would you like us to respond?

    • Note: Some questions will be published anonymously with their answers at the end of this story to share with other readers.