Apr 20, 2017
Analysts from Wells Fargo are projecting a solid market going forward but they note that those who expect a quick reappearance of pre-recession glory days may be in for disappointment or at least a lengthier wait.
“While we expect conditions to improve over the coming year and look for a relatively strong year for new and existing home sales, we still believe a return to the conditions that existed in the decades prior to the housing boom remain a long way off,” read a recent release from the company.
That’s not to say the figures aren’t trending upward. The company projects new home sales will grow by better than 12 percent this year while housing starts could break 1.26 million.
The problem is that the latter number, rosy as it might sound, remains nearly half a million shy of what was considered usual previous to the market’s big contraction.
That has left many with optimistic but tempered expectations about what a “new normal” might look like when the market finds equilibrium.
“Despite the expected gains in sales and new home construction, our housing forecast remains slightly below consensus forecasts,” it said.
It is easy to see the company’s reasons for caution as a bevy of factors continue to dampen potential expansion. Previous to hitting choppy waters, the red-hot real estate market of yesteryear may have sapped demand for present-day buying, especially among financially traumatized homeowners who have seen their equity wither or vanish entirely.
Then there’s the inventory issue. If some are wary of buying starter homes, builders are wary of constructing new ones. The affordable housing stock that’s left has often become rental property which sees considerable growth during hard economic times. The resulting squeeze on inventory has priced some folks out of the market.
Still, the numbers indicate more an adjustment of expectations than a discouragement.
“Moreover, we believe the new normal for housing starts is likely a touch below the old norm,” said the company, “perhaps in the range of 1.6 million units, which we might get to by the end of this decade.”