Starts: After further review
Before the season began, Sports Illustrated predicted the following Super Bowl scenario: Falcons over Chargers.
Alas, the Falcons lost their first playoff game. And the Chargers didn’t even make it out of the regular season.
HCN refers to this sports story for two reasons. First: In its digital form, this article’s reference to “Super Bowl” will score very high in search engine optimization logarithms. Second: The story illustrates how hard it is to look into the future with any degree of accuracy.
Consider housing starts.
Here was the NAHB’s pre-season forecast for 2011 single-family starts: a 21% increase to 575,000 — delivered during a seminar that included the approval of an economist from Freddie Mac. Here was McGraw-Hill Construction’s single-family housing forecast for 2011 — a 25% increase.
It turns out these were the football equivalents of predicting a Colts Super Bowl victory. (Note: The Colts were 2-14.)
Here’s what actually happened: Single-family housing starts declined 9.0% to a record-breaking low of 428,600. The numbers are painfully clear at census.gov.
According to the NAHB’s website, the group’s 2012 forecast is for 17% growth in single-family starts. One has to admire this optimism. But is there a prognosticator with a better track record we can turn to?
The answer is yes. And here’s the background.
Last year when the NAHB offered its optimism, two readers of this column — Byron Potter of Dallas Wholesale Builders Supply and Paul Gabbard of Malone Lumber Do it Best — told us with certainty that 20% gains weren’t going to happen.
We reached out to this prescient duo for their thoughts on 2012.
Potter, who was very close to predicting a total starts increase of 3.4% in 2011, had this to say about 2012: “Our forecast shows that the first half of the year is a steady increase, but the last half of the year retreats. We are hearing reports about forecasts that show 17% to 22% growth — we want to believe that, but our sense is that at YE2012, growth in housing starts will be plus 2%.”
Here’s Gabbard: “I hate to keep sounding like a cynic, but the factors affecting housing (unemployment, foreclosure, low appraisals) still exist.”
During this month’s International Builders’ Show, the NAHB will give its reasons for its double-digit growth forecast. Most likely, they will include pent-up demand, immigration, housing formation and the powerful urge of the nation’s college graduates to move out of their parents’ basements. All strong arguments.
We will listen patiently. We will write down their theories. But we must also consider Potter and Gabbard.
My forecast for 2012? Giants over Patriots.