Has the Housing Industry Hit Bottom?

RISMEDIA, December 18, 2009—Despite significantly lower traffic and sales this month, Southern California retained pricing strength and the majority of surveyed builders expect revenues to increase in 2010, according to John Burns Real Estate Consulting’s December survey of home builders.

“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 Jody Kahn, a vice president with the firm. “This month’s survey results, backed by numerous channel checks and our Consulting team’s work in the market, confirm that buyers feel little urgency to buy homes today, and probably won’t until the tax credit expiration nears next Spring.”

This month’s survey consists of 264 home building industry executives from public and private companies. In total, their insight is reflective of on-the-ground conditions in 93 MSAs and 2,000+ communities.

Also of interest, 57% of respondents reported that they are planning for more revenue in 2010 than 2009, driven by increased community count, better orders and slightly higher prices. The most optimism came from the Northeast, Southwest, Texas and Southern California. “If they are correct, and we believe they are, the trough for this cycle was 2009 for single-family starts, new home sales and new home prices,” said CEO John Burns. “That being said, the continued shift to smaller, simpler homes may drive the headline new home price down a bit, and the recovery will be slowed by rising distressed sales.

Conditions are likely to vary dramatically by submarket and price point, which we have addressed in our Land Acquisition and New Home Strategy report for 23 MSAs.”

Additional survey highlights include:
-Average net sales per community declined to 1.4 nationally from 1.6 last month, and from a recent high of 2.0 in September. Only the Southern Florida and Southeast regions reported increased net sales per community, while the Southern California, Midwest and Northern Florida regions reported flat net sales rates.
-The average unsold, finished inventory per community increased to 3.3 units, rising from a recent low of 2.8 units. We believe the rise is explained by aggressive speculative starts by a few builders who are betting on strong sales in the Spring. In addition, higher cancellations during November from sales that did not close within the original tax credit deadline were reported.