Emerging From Housing Boom's Dark Shadow -State Forecasts 2008
Housing markets with the biggest booms in 2004 and 2005 will generally be the slowest to return to normal levels of activity and those that showed more restraint will be the first to get back on track, according to the 2008 State Starts Forecast for single-family production released by HousingEconomics.com this week.
The major exception is the Midwest, the hardest-hit region of the country where some key markets that have been languishing because of weak local economies aren’t likely to see brighter horizons until next year as job and income growth gradually improve.
The report notes that the correction that started last year has affected different markets to different degrees, “but even markets with few signs of over-heating during the boom have slowed considerably.”
“Nationally, the pace of housing starts in the fourth quarter of 2006 was down more than 29% from its peak in the third quarter of 2005,” the housing analysts say in an overview of their state and metro area housing starts forecast. “In local markets, half of the 100 largest metropolitan statistical areas that NAHB forecasts were down between 15% and 40% from their 2005 level of production, while some of the most severely affected markets were down 50% or more from their 2005 highs.”
Nationally, NAHB is forecasting almost 1.2 million single-family housing starts in 2007, a 30.2% decline from a peak of almost 1.72 million in 2005, and 1.31 million in 2008, down 23.8%.
Double-digit rates of house price appreciation in 2004 and 2005 on the Office of Federal Housing Enterprise Oversight's House Price Index (HPI) “clearly indicate markets out of balance,” the report notes. Metro areas with prices climbing the fastest between the fourth quarter of 2003 and the same period of 2005 include: Naples, Fla. (70.5%); Bakersfield, Calif. (70.3%); Palm Beach, Fla., (67.4%); Cape Coral, Fla. (66.4%); and Phoenix (63.5%).
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