Status Quo or Housing is Back?

Earlier this week, David Crowe, The National Association of Home Builders' chief economist, reduced his previous forecast for 2011 single-family housing starts. Crowe now predicts 2011 will show no change over the 471,000 recorded starts from 2010. In fact, he also reduced his 2012 predictions by 19%, now saying that he expects 698,000 single-family starts (down from his 860,000 previous prediction). Crowe based his revisions on the conflicting economies of normalizing housing prices, historically low mortgage rates and housing affordability versus high oil prices, a weak US dollar, and the still high unemployment rate.

On the opposite side of the spectrum, 3 weeks ago in Fortune Magazine, Mike Castleman, Founder and CEO of Metrostudy, said "America needs to build a lot more houses. And in most markets the price of new homes is fixin' to rise, not fall." Metrostudy collects housing data across 41 markets in the US, including new housing starts, lot inventory, resale homes for sale and the number of months it takes to sell them. With current inventory levels of for sale, vacant and new construction homes totaling less than 1/4 of what they were in 2006, Castleman says we'd sell out in 2.5 months. He says we're heading for an incredible shortage of housing. To read the complete story from Fortune magazine, click here.

Last month's data for the Chicago MSA improved slightly as the unemployment rate dropped for a second month to 8.7. , inventory of existing homes decreased 10.8 percent from last year and our median home sales price increased to $158,000. We don't expect huge improvements overall in 2011, but it seems we're moving in the right direction. We'd like to think Mike Castlman's outlook is correct, and that next year at this time, we'll be talking about the severe shortage of housing.