This website requires certain cookies to work and uses other cookies to help you have the best experience. By visiting this website, certain cookies have already been set, which you may delete and block. By closing this message or continuing to use our site, you agree to the use of cookies. Visit our updated privacy and cookie policy to learn more.
This Website Uses Cookies
By closing this message or continuing to use our site, you agree to our cookie policy. Learn More
This website requires certain cookies to work and uses other cookies to help you have the best experience. By visiting this website, certain cookies have already been set, which you may delete and block. By closing this message or continuing to use our site, you agree to the use of cookies. Visit our updated privacy and cookie policy to learn more.
ACHRNews logo
search
cart
facebook twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
ACHRNews logo
  • Magazine
    • Subscribe
    • Current Issue
    • Digital Edition
    • Archives
    • The NEWS eNewsletter
  • News
    • Breaking News
    • Newsline
    • FYI
    • Distribution Trends
    • Standards & Legislation
    • Manufacturer Reports
  • Products
    • HVACR Industry Store
    • Top 20 Products of 2018
    • Interactive Product Spotlights
  • Multimedia
    • Videos
    • AHR 2019 Videos
    • Podcasts
    • Infographic
    • Photo Galleries
    • Webinars
    • eBooks
    • The NEWS HVACR Quiz
    • Online Poll
  • Refrigeration
    • Refrigerants
    • Refrigerant Regulations
    • Reclaim
    • FROSTlines
  • Service
    • Testing, Monitoring, Tools
    • Duct Dynasty
    • Service 101
    • Components & Accessories
  • Business 101
    • Training & Education
    • Service, Apps & Software
    • Opinions
    • Guest Column
    • The Coach's Blog
  • Residential
    • Home Automation
    • Residential Ductless
    • Residential Geothermal
    • Residential IAQ
    • Residential Cooling Showcase
    • Residential Heating Showcase
  • Commercial
    • Internet of Things
    • Commercial Ductless
    • Commercial Geothermal
    • Commercial IAQ
    • Commercial Cooling Showcase
    • Commercial Heating Showcase
    • Marijuana Market
  • Directory
    • Manufacturers
    • Wholesalers
    • Consultants/Services
    • Manufacturers Reps
    • Associations
    • Parts & Equipment Exporters
    • List/Update Your Company
  • More
    • Editorial Calendar & Editor Assignments
    • Calendar of Events
    • Classifieds
    • Custom Content & Marketing Services
    • Continuing Education
    • Market Research
    • Sponsor Insights
    • eProduct Info
    • White Papers
    • Contests
  • Contact
    • Advertise
    • Submit a Letter
Home » Housing Is a Bright Spot in the Economy

Housing Is a Bright Spot in the Economy

June 5, 2001
Greg Mazurkiewicz
Reprints
No Comments
WASHINGTON, DC — The mood was upbeat at the National Association of Home Builder’s (NAHB’s) 62nd Semiannual Construction Forecast Conference here. Although the U.S. economy has slowed, housing still shows surprising strength.

Presenting his economic and housing outlook, David Seiders, senior staff vice president and chief economist of the NAHB, noted that this year the Federal Reserve has already made several reductions in interest rates to try to spur the economy. However, he said, “The housing sector has been one of the bright spots in our weakening economy.”

Housing has been holding up very well, but there is now evidence of a leveling.

The NAHB forecast, he related, calls for a dip in growth but no recession. The country will see a better second half and will be stronger still in 2002.



The unemployment rate will rise this year to around 5%, then level off, he predicted. Consumer confidence, though, has shown a substantial decline. Both the present and expectations components are down sharply.

“Housing starts should dip momentarily, then start slowly up again,” Seiders stated. Manufactured housing has “fallen straight down.” He’s forecasting it to bottom out this year and then pick up.

Residential remodeling will continue its modest growth. Residential fixed investment will be down in the second and third quarters, then advance again.



No Recession

Joel Prakken, chairman of Macroeconomic Advisers, LLC, said that we’ll avoid a recession, but there will be below-trend growth. “Housing, however, will fare relatively well.”

Why has growth slowed so sharply?

We’ve gone from an overshoot on capital spending to an undershoot, stated Prakken. We have the energy pinch with higher oil, natural gas, and electricity prices. We’re seeing rattled consumer and business confidence. We’re feeling the effects of earlier monetary tightenings by the Federal Reserve. There has also been a faster response to a slowdown by business.

Why will we skirt recession?

Consumer spending and construction are hanging in, Prakken noted. There’s been a weakness in goods demand (inventory backup) and declines in industrial production. But he said that the energy pinch is easing some, and monetary and fiscal policy are turning expansionary. The first quarter will be the weakest, then we’ll see a gradual return to “trend” growth.

Why should growth rebound without a recession?

The inventory adjustment will be largely completed in the second quarter, he stated. A big second-quarter rebound in auto production has been announced. The undershoot on capital spending fades after the first half, he predicted. The Federal Reserve has been cutting short-term interest rates. Mortgage rates are down, boosting housing. And we have “the fiscal stimulus from tax cuts,” said Prakken.

“When the Fed was tightening interest rates, it hurt housing,” he remarked. “Now that it is easing rates, it is helping housing.”



Figure 1. Total housing starts, historical and projected.(Source: NAHB)

Question Marks

David Jones, chairman of Aubrey G. Lanston & Company, said that he calls for a weaker economic recovery next year. He explained that there are a lot of question marks on the economy because of:

  • The high-tech bubble breaking;
  • Energy prices increasing; and
  • The business sector’s adjustments, including inventory correction, layoffs, and excess capacity.
  • Jones said he looks for three quarters of low growth until the second quarter of next year before we return to trend growth.

    “We are in a profits recession,” he said. We probably will avoid a technical recession, but if we continue at a slow growth rate, it may feel like one.

    What counts regarding a tax cut is whether it is front-loaded, he stated. But the effects won’t come until the fourth quarter of this year, and possibly not until next year.



    Figure 2. Single-family housing starts, historical and projected. (Source: NAHB)

    Good to Be Apartments

    Discussing multifamily housing, Jack Goodman, a principal of Hartrey Advisors, said that the multifamily segment has been at a healthy level since 1997. This is occurring even with a record home ownership rate. Apartment renters are at a 1.1% growth rate, which is near the total household growth rate of 1.2%.

    Why has there been no overbuilding? Goodman pointed out that the multifamily market has better information, as well as memories of 10 years ago, when it seriously overbuilt. “The dumb money has gone elsewhere,” he said.

    The long-term prospects are that consumer demand is likely to maintain moderate growth. Financing of supply seems ample, he noted, and the most likely long-term path is a gradual increase in production.

    Three niches to watch, he reported, are upscale renters, in-fill locations, and rehab opportunities.

    Newly built apartment characteristics are that units are getting bigger — square footage is up 8% — and units are getting better — they include more amenities. However, he said, the condominium share of multifamily starts is surprisingly low.

    There are near-term uncertainties, Goodman concluded, but in the long term, to paraphrase Mel Brooks in History of the World Part I, “It’s good to be apartments.”



    Apartment Demographics

    Looking at demographic trends on apartment demand, Kimberly Fiala, senior vice president, JPI Market Research, said that her firm looks at such demographic data as population growth, net migration, propensity to rent, household formations, income, age, marital status, and job growth to determine apartment demand.

    The company does consumer surveys of renters, student focus groups on college campuses, and new lifestyle surveys. (A lifestyle survey is a detailed study on personal attitudes, preferences for services and amenities, interests and opinions, and feelings on time and money.)

    JPI found that the most highly valued interior amenities include additional soundproofing from the units above and next door, and upgraded appliance packages. The most highly valued exterior amenities include timers on air conditioners and water heaters. Fiala commented that consumers are “moving toward the smart home concept.”

    Studying lifestyle preferences enables builders to determine the floor plan design, unit mix, and amenities that will attract desirable renters. It also reveals buying behavior and the media usage that will reach renters.

    Publication date: 06/11/2001

    Subscribe to The NEWS

    Recent Articles by Greg Mazurkiewicz

    Differentiate Yourself to Win

    Advertising: Do It Right - Clean and Tight

    Energy Efficiency is Helping to Drive the Economy

    Exploring Water Reuse, Reconsidering Water Filtration

    How to Optimize Your Local Presence on the Web

    200greg-mazurkiewicz-heads

    Greg Mazurkiewicz is Web Editor. He can be contacted at 248-244-6459 or gregmazurkiewicz@achrnews.com. Greg handles the day-to-day operations of The NEWS' website, www.achrnews.com, including the Extra Edition page, which offers additional online-exclusive articles. He has 40 years of experience as a writer and editor. He holds a bachelor's degree in Journalism and a master's degree in Business Management.

    Related Articles

    NAHB: Housing Market Is in Retreat

    Energy Efficiency is Helping to Drive the Economy

    Housing Market Is Still Robust, But Is It At Its Peak?

    Economy Is Revving Up

    You must login or register in order to post a comment.

    Report Abusive Comment

    Subscription Center
    • Subscribe
    • Online Registration
    • E-Newsletters
    • Subscription Customer Service

    More Videos

    Sponsored Content What Is Sponsored Content

    Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the ACHR News audience. All Sponsored Content is supplied by the advertising company. Interested in participating in our Sponsored Content section? Contact your local rep.

    Close
    Trane-indoor-air-quality-product-01
    Sponsored By
    Trane Residential

    Protecting Your Customers’ Indoor Air Quality Is More Important Than Ever

    From seasonal maintenance to a system upgrade, your business is actually centered around providing the best indoor air experience, with quality at the core.

    Popular Stories

    Breaking News - The ACHR News

    Ingersoll Rand Increases Prices on HVAC products

    R-22 Phaseout

    Using (or Abusing) the R-22 Phaseout as a Sales Tool

    Senate HFC Phasedown Bill

    Senate HFC Phasedown Plan Debuts With Broad Support

    Breaking News - The ACHR News

    Lennox Industries Inc. Announces Price Increase

    Troubleshooting-situation

    Troubleshooting Puzzle: An Uncomfortable Bedroom

    The ACHR News Airpod Giveaway

    Events

    September 16, 2020

    2020 World Congress for Solar Cooling

    IASC seeks submissions that represent the best contemporary and innovative technology and thinking about Solar Cooling from a global and diverse range of designers, consultants, practitioners, engineers, architects, educators, thought-leaders, students and other professionals concerned with cooling, people, buildings and energy.
    December 30, 2030

    Webinar Sponsorship Information

    For webinar sponsorship information, visit www.bnpevents.com/webinars or email webinars@bnpmedia.com.

    View All Submit An Event

    Poll

    Holiday Appreciation

    What is your preferred way to show employees your appreciation during the holiday season?
    View Results Poll Archive

    Products

    "More & New" HVAC Spells Wealth - book

    "More & New" HVAC Spells Wealth - book

    See More Products
    The NEWS - ACHR - Logo The NEWS - ACHR - Digital Edition
    Digital Edition

    ACHRNEWS

    The ACHR News - December 2, 2019

    2019 December 2

    Week 1: December 2
    In this issue of The ACHR NEWS, we look at unique applications of HVAC technology, and new markets contractors should consider expanding into.

    Week 2: December 9
    We also examine Variable Refrigerant Flow (VRF) technology, and the benefits that contractors can pass along to their customers through the equipment.

    View More Create Account
    • Resources
      • Submit a Letter
      • Submit a Press Release
      • Mechanical Group
      • List Rental
      • Ad Specs
      • Reprints
      • eProduct Info
      • Survey And Sample
      • Privacy Policy
    • Want More?
      • Subscribe
      • Connect

    Copyright ©2019. All Rights Reserved BNP Media.

    Design, CMS, Hosting & Web Development :: ePublishing