The consensus among economists at the NAHB's Spring Construction Conference was that the nation is at, or very close to, the bottom of the "Great Recession," as some were calling it. Many of the economists said they see an upward move by the second half of 2009 but noted it will be a long recovery.
A key indicator all of the speakers are watching is housing starts, which Mark Zandi of Moody's Economy.com said hit bottom in the first quarter of 2009.
As each economist stood before the crowd at NAHB's headquarters in Washington, D.C., on April 23, they argued the merits behind the different industry indices, yet all agreed with a statement made by UBS's chief U.S. economist Maury Harris. He said the indices are like jury witnesses--"no one witness is completely honest," but if you get enough saying the same thing, there has to be some truth to it.
As the charts flipped across the screen at the front of the auditorium, key factors became clear, the falloff in late 2005 and 2006 was quick with housing leading the way, only to be followed by what JPMorgan Chase's senior economist James Glassman called "walking up to the gates of hell" after Labor Day. "September changed the whole course of things," he said, but added times are becoming hopeful.
Glassman pointed to key areas from which he gains his optimistic outlook. The oil headwinds of last summer are now a tailwind, as well as housing valuations being back to normal and inventory showing signs of adjusting. Glassman also pointed to the policies the administration is implementing, saying, "Thank God."
Zandi agreed with most of what Glassman said and added that prices still have to fall, projecting a bottom in the fourth quarter of 2009 at a 36% price drop from the peak, with construction hitting a bottom in the second quarter of 2009. By early 2011, he projected 1 million units at an annualized rate.
"Mostly I'm a pessimist," Zandi said. "Even when things were good I was a pessimist, but I'm going to be an optimist."
Moving into recovery, all agreed that unemployment rates will be a huge factor, with projected highs of 9.3% to 10%. Zandi said he sees jobs beginning to stabilize by summer but pointed to the stagnant high number of 650,000 unemployment applications over the past couple months as still a bad number, even though it's not increasing.
David Crowe, NAHB's chief economist, said GDP is another indicator to watch. "A lot of signs are that some of the worst have been stuffed under the belt," he said, with the worst number coming in the fourth quarter of 2008 at -6.3% and early indicators showing a slight increase to a current -5.5%.
The only "bright spot" Eric Belsky, executive director of Harvard's Joint Center of Housing Studies, pointed to was that the echo boom generation will be leading the charge of future home sales, with a generation holding population numbers well above the baby boom generation. He also added that affordability is coming back in many markets.
Belsky said he sees the recession in the "early innings" and that housing wealth effects are a significant drag on the economy. He pointed to historical data showing an almost 50-month recovery time from the fallout of the 2001 recession, in regards to employment.
"We have a long way to go before we come roaring back," he said, although he would not put a time on it.
NAHB director of forecasting Bernard Markstein threw his thoughts into the ring, joining the optimists in the group. "We expect this quarter to mark the end of the decline in residential construction. While not a return to normalcy, 2010 should mark a significant improvement, although the pain will not be over for the formerly hot markets and the upper Midwest."