At IBS, credit availability subdues forecasts

Orlando, Fla. -- The International Builders' Show has become an annual launching pad for housing forecasts, and this year’s numbers came with a healthy dose of guarded optimism. David Crowe, chief economist from event sponsor National Association of Home Builders (NAHB), predicted a 21% increase in single family housing starts in 2011, with 575,000 new units compared to 475,000 in 2010. Pent-up demand and new household formation will combine in 2012 to form 860,000 new single family units, Crowe said in a Jan. 12 press conference. 

A more conservative estimate came from Edward Sullivan, chief economist of the Portland Cement Association, who earlier in the day projected 492,000 housing starts in 2011. Sullivan expressed concerns over the availability of credit, too much housing inventory on the market, and home prices still in flux. These factors will delay a housing recovery until 2012, he said, and the pace will vary widely region to region.   

The most positive news of the conference may have come from a panel of multifamily builders who shared their plans -- and their pain -- during the Economic Forecast and State of the Industry for Apartments and Condos on Jan. 13. The general consensus was that the worst was behind them. 

Robert Greer, president of Michaels Development Co., built 4,000 rental units last year in 31 states and plans to double that number in 2011. Michaels Development, which employs tax credits for their affordable housing units, has had to find alternative sources of financing to replace Fannie Mae and Freddie Mac. Difficult though it was, Greer is happy to be free of both agencies and has begun doing much of his own construction lending as well. 

Jay Jacobson, a multifamily builder who specializes in apartments, plans to construct approximately 2,000 units this year, compared to 112 in 2009 and zero in 2008. “There’s an amazing amount of private equity around, looking to invest” in residential construction, Jacobson said. The catch is that the developer or builder must put up a considerable amount of equity, he added.

Two other builders, Bill McLaughlin of Avalon Bay Communities has nearly 800 coastal units in the pipeline and Steven Patterson of ZOM Holdings is looking at 1200 units in 2011. The NAHB’s Crowe pointed out that vacancy rates have been falling for a year and rents are going up. “This is a good sign that it’s time to start adding to the stock,” he said.

Crowe’s prediction for multi-family housing starts was a 16% incr