The housing market may finally be on the path to a sustainable recovery, according to a new report, but industry insiders remain cautious of upbeat forecasts in an election year.
The Urban Land Institute, a nonprofit land-use think tank, released its real estate forecast for the next three years on March 28, predicting growth in both the residential and commercial sectors through 2014.
The survey compiled opinions from 38 real-estate economists and analysts, many of whom are ULI members, reflecting the panelâ€™s median forecast on 26 economic indicators dating back to 2009. Projections are based on data from 2009 to 2011.
The projections are based on a positive overall economic outlook. The survey results show the real gross domestic product (GDP) rising steadily from 2.5 percent this year to 3.2 percent by 2014; the unemployment rate falling to 8.0 percent in 2012 and down to 6.9 percent by 2014; and the number of jobs created is rising from an expected 2 million in 2012 to 2.75 million in 2014.
Most notably, the panel predicts that single-family housing starts will jump from 428,600 in 2011 to a projected 800,000 in 2014. As demand improves, home prices nationwide may rise as soon as 2013 and prices could tick up by 3.5 percent after the third year.
â€œThis survey [shows] confidence that the U.S. real estate economy has weathered the brunt of the recent financial storm,â€ said ULI Chief Executive Officer Patrick Phillips. â€œThese results hold much promise for the real estate industry.
Despite the run-up on construction during the housing boom, â€œweâ€™ve actually under-producedâ€ in the last decade, Peter Linneman, chief executive of the American Land Fund and a survey respondent, told the Wall Street Journal.
The recovery will likely have little resemblance to the explosive growth seen through 2005, Mr. Linneman said. â€œWe could have a substantial recoveryâ€ and still be easily below peak levels.
Other respondents had reservations of their own. â€œItâ€™s too optimistic,â€ Kenneth Rosen, chairman of the Calif.-based Rosen Consulting Group, told WSJ. He remains skeptical that single-family housing starts will nearly double by 2014. Itâ€™s a very aggressive forecast, he said, and the upcoming election could seriously hobble the marketâ€™s momentum, especially if investors have reason to fear a rise in capital gains taxes in 2013.