Housing Industry

IBISWorld: Outlook for U.S. Housing Industry
RisMedia

Business information analysts point to a two-year housing market slowdown followed by a gradual rebound

RISMEDIA, June 13, 2006—The U.S. housing industry—developers, builders, Realtors and others—may understandably view National Homeownership Month (June) with mixed feelings. Yes, the housing market has enjoyed a sustained period of high demand and high prices in many parts of the country, but now the tide is turning.

Indeed, new indicators, including the increasing inventory of unsold homes languishing on the market, point to a rapid cooling of the U.S. housing market in many once-hot areas.

Detailed market analysis recently published by business information analysts IBISWorld (www.ibisworld.com) underscores the trend and points to a two-year housing market slowdown followed by a gradual rebound.

Snapshots of the nationwide outlook for various components of the U.S. housing industry:

SINGLE FAMILY HOUSING CONSTRUCTION: The value of single-family housing construction is forecast by IBISWorld to decline by -4.9 percent in 2006, and -5.6 percent to a cyclical trough at around $380.3 billion in calendar year 2007 (in constant 2005 prices). The number of single-family housing starts is also projected to decline over the short term to a cyclical trough at 1,520,000 units in 2007 (-11.4 percent over two years). Industry revenue is forecast to decline roughly in line with the value of new housing construction, falling by -2.7 percent in 2006, and -4.2 percent to a cyclical trough of around $340 billion in calendar year 2007 (in constant 2005 prices).

MULTI-FAMILY HOUSING CONSTRUCTION: The outlook for the multi-family housing construction industry is for subdued cyclical growth in revenue averaging 1.5 percent per annum to December 2010, lagging well behind the projected pace of US GDP growth of 3.0 percent per annum, but corresponding with the projected weak average growth in the value of new multi-family housing construction, and the volume of multi-family housing starts.

LAND DEVELOPMENT: The land subdivision and land development industry is forecast to record subdued revenue growth averaging 1.5 percent per year to December 2010. The weak growth profile stems mainly from the projected downturn in the housing construction market and a more subdued pace of growth in residential property values.

RENTALS: IBISWorld forecasts slow real growth in gross rents received by lessors of residential buildings and dwellings. Investment returns from rental housing will be adversely affected by several factors, including: slow or negative real growth in capital values over the outlook period (following a period when capital values grew at a rapid rate); relatively high rental vacancy rates; and a rise in interest rates.

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