The housing market will continue to deteriorate in 2009, according to McGraw-Hill Construction’s recently released 2009 Construction Outlook. The correction in single-family housing that began in 2006 has continued through 2008, with single-family starts dropping by 38 percent to 582,000 units. However, market declines in 2009 will be smaller than in the previous three years.
In 2009, single-family housing starts are predicted to slide another 4 percent to 560,000 units, representing a 2 percent decrease in dollars. McGraw-Hill economists expect this continued decline to further delay the housing market’s recovery.
The 2009 Construction Outlook indicates that the major federal actions (the Housing and Economic Recovery Act of 2008 and the Emergency Economic Stabilization Act of 2008) implemented in an attempt to stabilize the housing industry and the economy in the wake of the mortgage crisis may take a full year to have a substantial positive effect. Even if these measures are successful, single-family housing is not likely to experience a jump-start for at least the next six months to a year, according to the forecast. Instead, it will skirt the market bottom for a while, then begin to make steadier progress in the second half (possibly late) of 2009.
A slower rate of household formation in 2008, due to adverse economic conditions, has contributed to the excess of housing inventory. As the 2008 federal measures boost credit availability, household formation is expected to pick up and boost home sales. According to McGraw-Hill, however, the existing single-family home market is expected to lead the housing recovery, while the new single-family home market trails behind. As excess housing inventory gradually decreases, home prices should stabilize. But until then, the forecast predicts that home prices will drop another 10 percent in 2009.
The 2009 Construction Outlook notes the difficulty of making future projections with any degree of certainty at this time, given that the government’s financial rescue package has only recently been implemented and its effects and success are still largely unknown. What is certain, though, is that 2009 will be a period of transition for the housing industry and the U.S. economy as a whole.
To purchase the full report of McGraw-Hill’s 2009 Construction Outlook, which addresses all segments of the construction industry, click here.
