US housing will recover, grow slowly in ’11, ’12 - trade group

27 October 2010 21:44  [Source: ICIS news]

WASHINGTON (ICIS)--The US home building sector has turned the corner and is expected to show slow but steady growth in 2011 and 2012, a top housing economist said on Wednesday, predicting a 37% gain in new residential construction next year.

David Crowe, chief economist for the National Association of Home Builders (NAHB), cited a new US Commerce Department report as “a signal that we have finally turned the corner”. In that report, sales of new single-family homes rose by 6.6% last month.

Based on that and other housing data of the last few months, Crowe said that “we expect sales of new and existing homes to be climbing steadily from here forward”.

Speaking at the association’s regular semi-annual housing and economic outlook, Crowe said that construction for new single-family homes will revive, although slowly.

The housing market is a key downstream consumer sector for the chemicals industry.

New home construction drives demand for a wide variety of chemicals, resins and derivative products such as plastic pipe, insulation, paints and coatings, adhesives and synthetic fibres, among many others.

The American Chemistry Council (ACC) estimates that each new home built represents some $16,000 (€11,360) worth of chemicals and derivatives used in the structure or in production of component materials.

Crowe said he expects 2010 to show only a marginal 8% or 9% increase in new single-family home construction compared with 2009.

However, he said he expects housing starts for one-family homes will increase by 37% in 2011 to approximately 655,000 units for the year, and by 48% in 2012 for an annual pace of 970,000 new homes built.

But the sharp gains in home construction forecast for next year and 2012 are relative to record lows that the housing sector reached during the recession, he indicated.

Crowe said he does not expect annual US construction of single-family homes to reach 1m units or above until 2013.

During the country’s housing peak in 1995-2003, the yearly average for new home construction was around 1.25m units, he noted.  In 2005, just before the housing bubble burst, the US saw construction of 2.07m new homes.

He said that while NAHB member contractors remain very pessimistic about the near-term future, there are encouraging signs in fundamental data.

Crowe noted that with record low mortgage interest rates and equally low home prices, housing affordability is at its highest level in 20 years.

He said there is a great deal of pent-up housing demand, with perhaps 1.5m new households likely to be formed in the next few years as young people finally leave their parents’ homes and existing homeowners again begin to trade up to larger or better homes.

However, he cautioned that the key to a recovery for the housing sector and the overall US economy is job growth, which he expected will continue to be modest at best.

He noted that since the recession ended in June 2009, monthly US private sector job growth has been below 100,000.

“We have to add 100,000 to 125,000 new jobs each moth just to keep up with growth in the labour force,” he said.

“We see some jobs growth next year reaching 200,000 per month by late 2011, but we expect that unemployment will still be at or above 8% by the end of 2012,” Crowe said.

The current US unemployment rate is 9.6%.

($1 = €0.72)

To discuss issues facing the chemical industry go to ICIS connectPaul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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