MetroStudy Report - Looking at our fourth quarter data as well as the latest government releases, our housing starts forecast remains on track for a modest increase in builder activity this year.

The latest data from the federal government suggested that starts were up in December (the level was up 4.1%, +/- 11.6%). The government data lack any detail, of course. Our own new data show that starts rose in the fourth quarter of 2011 (versus the same quarter a year ago) in:

Washington DC
Raleigh, Austin
Salt Lake City
Chicago
and (North) Atlanta

…just to name a few of the major markets.

Starts in Coastal L.A. fell, but rose in the Inland Empire and San Diego.

The newest Metrostudy Market Sentiment Survey showed a substantial surge of optimism. The number of respondents indicating that conditions are “extremely poor” fell by HALF in a single quarter. This was accompanied by a surge in the middle of the ten-scale that we use in the survey. The reponses of “5″ and “6″ increased sharply, indicating a middling sentiment about the markets. Given where we’ve been, we’ll take it! There has been some increase in the high numbers as well, but the 8s, 9s, and 10s are still few and far between.

Traffic counts and traffic quality have both been improving, according to those responding to our Market Sentiment Survey. Our weekly traffic and contracts reports for selected markets also show some modest improvement in traffic in early 2012.

We do have to remain on guard, however, as there will be more bank seizures and more bank-owned homes hitting the market in 2012 than we saw in 2011. There was an increase in reposessions in the second half of 2011, and the increase is expected to carry over into this year. A spokesman from RealtyTrac estimates that about 400,000 additional homes would have been reponssessed last year had the documentation issues not arisen. They expect a 25% increase over last year’s 804,000 home seizures. Although RealtyTrac’s numbers are typically poor at accounting for exact totals, the direction appears correct.

Overall, we’re just over half way through the foreclosures and REO (numerically speaking), but we are most of the way through the impact on the homebuilding industry (because builders are suffering less from competition from REO and short sales now than they were two or three years ago). Still, we are not out of the woods. Nationwide, we still have to get through:

* close to 400,000 homes already in the hands of the banks,
* nearly 2 million homes in the foreclosure process,
* 1.5 million mortgages that are seriously delinquent but not yet foreclosed,
* possible 2 million more who are badly upside-down.

That said, builder inventories are low once again, and construction activity is slowly rising in many markets.
In 2012, we are expecting 690,000 total housing starts, 478,000 of which will be single-family detached homes. Multifamily development will increase sharply, but that discussion will be left for another blog post.