Joint Center points to housing opportunities
Orlando, Fla. -- The bar charts and graphs told a complicated construction story that was interpreted with a certain degree of optimism by a Harvard economist.
Joint Center for Housing Studies of Harvard University economist Kermit Baker gave his presentation during the Presidents Council advisory board meeting held Wednesday here at the Orange County Convention Center.
There are many opinions about the health of the remodeling market, he said, pointing to a wide range of statistics. According to Baker, home improvement spending (rental and owner improvements as well as maintenance and repair) was a $280 billion market last year, reflecting very little growth over the last two years.
One positive factor is the old and under-invested rental stock in America today. "I think we'll see a lot of growth there in the coming years," Baker said.
Three strong opportunities for housing include sustainable (green) remodeling, rehabilitating distressed properties, and serving an aging population. Historically, the industry hasn't done very well in these areas, Baker said.
When asked about housing starts forecasts for 2012 that call for 700,000 total starts in 2012 reflecting a 17% gain, Baker said it could happen.
"I think there's a lot of strength in the multi-family market; I don’t think we're seeing a lot of strength yet in the single-family side," he said. "We are beginning to see some pent-up demand that's going to break loose at some point."
He referred to a colleague Chip Case, (the "Case" from the S&P Case-Shiller Home Price Index) who remarked: " 'At some point in the housing cycle, there's a whistle that only home buyers and dogs can hear,' ” he said. "I don't know when we're going to hear that whistle. But some point in time we're going to see a pretty strong uptick in activity."
When prices and mortgage rates start inching up and consumers feel that they might miss out on a deal, that's when he expects the growth story to begin in force.
Baker is co-author of "Bigger Isn't Necessarily Better," about efficiencies and best practices in the housing construction industry. Profits rise, but not necessarily efficiencies, he said.