Source: Portland Cement Association, Skokie, Ill.
Home foreclosures decreased dramatically in 2011, but industry experts caution that instead of a housing market improvement indicator, they reflect legal, process and “robo-signing” issues.
Addressing the 2012 International Builders’ Show recently in Orlando, PCA Chief Economist Ed Sullivan said that the 1.9 million foreclosures reported in 2011 is understated by more than one million due to processing delays. “Despite small improvements to the economy, the underlying fundamentals of the mortgage market have not improved,” he noted. “Instead we are seeing bank processing delays that are pushing foreclosures into 2012 and maybe even 2013. This is resulting in excess housing inventories and continues to drag down housing starts.”
Sullivan expects 443,000 new single-family housing starts in 2012, a meager three percent increase from last year. Even with significant gains following in 2013 and 2014, he added, it will take until 2016 for the housing industry to be back to 2002 levels. “The current ‘visible’ housing inventory vastly under-reports foreclosure inventory that must be burned off,” he affirmed. “Adverse implications for months of supply calculations and home price delay signals to homebuilders to increase activity and puts off recovery.”
Multi-family housing will recover much sooner than single-family building, according to Sullivan, who reported a 55 percent increase in the former category for 2011, and projects double-digit increases in 2012 and 2013. Sector recovery will be led by increased demand for rental units and an easing in lending standards.