Recovery seems to be on the minds of many these days as the economy continues to shake off the after-effects of the recession. Housing prices and sales are climbing, the unemployment rate is falling and near record-low mortgage rates are bringing potential buyers who had been reluctant to make a move during the housing downturn back into the market.
With all this activity heating up, some economists and housing experts wonder if residential real estate could be heading toward another housing bubble. According to Dan Fulton, president and CEO of Weyerhaeuser Co., Maracay Homes’ parent company, consumers can rest easy.
Fulton told REIT.com at the National Association of Real Estate Investment Trusts’ Washington Leadership Forum recently that he believes the housing market recovery is “very significant,” but it’s just getting started.
“Household formation dropped significantly during the recession,” Fulton said. “Household formation in the U.S. should roughly be about 1.2 million per year. It dropped to 700,000. There’s a rebound taking place now as people are gaining confidence. Inventory levels of both new and resale homes are at record lows.”
He added, “With the underpinning of household formation coming back, a need for housing starts, low mortgage rates and a general increase in consumer confidence, we are at the early stages of a housing recovery. But it’s real, it’s solid and we think that we’ve got another three to four years in front of us just to recover to maintenance levels of what we think are necessary to cover long-term housing starts.” Over the long-term, Fulton said the housing market will demand between 1.6 million and 1.9 million new houses per year.
With new home inventory at its lowest level in eight years, according to the National Association of Home Builders, builders throughout the country are firing up production again. Maracay Homes plans to open 13 new neighborhoods in Arizona this year – including eight in the East Valley.
We believe the NAHB’s prediction of 448,000 new-home sales for the year — roughly half the amount of a typical, pre-recession year — is further proof housing’s recovery will be slow and steady as it heads toward acceleration in 2014.
Andy Warren is President of Maracay Homes, the Arizona subsidiary of the Weyerhaeuser Real Estate Company. He serves on the Board of Directors for the Home Builders Association of Central Arizona and the Greater Phoenix Leadership, as well as the Board of Directors and as an Executive Committee member with the Greater Phoenix Economic Council. He is also an active member of the Urban Land Institute.