27 April 2011 21:55 [Source: ICIS news]
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David Crowe, chief economist at the National Association of Home Builders (NAHB), said that a mix of positive and negative economic indicators suggest an eventual but slow recovery for the US housing industry, especially new home construction.
The housing market is a key downstream consumer sector for the chemicals industry, driving 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 (€10,880) worth of chemicals and derivatives used in the structure or in production of component materials.
In the association’s semi-annual housing forecast and outlook, Crowe said that positive indicators include historically low home mortgage interest rates, now just under 5%, that he does not expect will increase substantially before the end of 2012.
As home prices continue to fall, housing affordability remains very favourable, he said, noting that 74% of recently sold homes were affordable for families at the median income level.
In addition, Crowe contends that there is a large volume of pent-up housing demand among young adult populations in the 20-35 year-old range who could not buy a new or existing home during the recession and soon should be moving out of their parents’ homes and into the housing market.
“A 30-year-old living in mom’s basement is not a sustainable lifestyle, either for the child or the parent,” he said, “and we will see housing demand growth develop from that.”
However, Crowe also said he was worried about factors that could impede a housing recovery.
He noted that home builders continue to face difficulty in getting project development loans from banks, consumer confidence was still low, unemployment remains stubbornly high, and the ongoing flood of foreclosed properties for sale at sharply discounted prices discourages new home construction and sales.
Crowe said he was nonetheless confident that the housing sector would see continuing if slow improvement, with housing starts growing from a projected annual pace of around 471,000 units this year to perhaps 698,000 new homes in 2012.
Longer term, he expects the market to return to a more or less normal level in later years, with an average annual pace of new home construction at 1.5m units - but never again to reach the 2m-plus annual rate seen in the boom years before the housing market collapse.
($1 = €0.68)
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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