Construction Forecasters Predict Bottom is Near-If Not Here; Optimism Seems to be Prominent Theme Looking Ahead
April 23, 2009

A semi-annual construction forecast held today in Washington, D.C., by the National Association of Homebuilders (NAHB) held a much different theme than the group's most recent forecast, held in October of 2008. Many economists who spoke today predicted not only that the bottom of the construction market is hopefully near—if we're not already at bottom-but many even shared an optimism not seen recently in such forums.

David Crowe, chief economist for the NAHB, shared several reasons he believes it's nearing an end.

One of these is the work of the Federal government to revive the market.

"The Fed has done virtually everything they can think of, and probably sill have some tricks up their sleeves," he said. "They continue to surprise us."

The fact that some material prices down also is a positive, he said.

"When there is an opportunity to build, there's at least downward pressure in the underlying material prices," Crowe said.

Maury Harris, an economist with UBS Securities LLC, shared this optimism.

"We've seen the downturn in house prices, we've seen the recession, but the good news is, I'm finally turning into an optimist," he said. "I think the second half of the year we're going to see a turnaround."

He added, "We think the worst is behind us."

Regarding the credit crunch, Harris said he thinks that lending standards will soon ease—at least in the mortgage area, if not more widespread.

James Glassman, an economist for JP Morgan Chase, also applauded the government's efforts to revive the economy.

"We all have complaints about what's going on [in Washington] … " he said, "but the truth is, if you look at the actions we're taking, [I] thank God."

Glass believes these actions have led to a global action for which the U.S. construction market also should be thankful.

"It's important to keep in mind that others around us are following the lead of the United States," he said. "We've all become less negative in how we think about the future because we're watching the Japanese do the same thing, the Chinese doing the same thing, those in India doing the same thing …"

Glassman also recalled where the economy's been-noting that it's all relative.

"After Labor Day, we really were at the gates of hell," he said. "It all began with the rescue of the GSEs … This was the event that changed the whole course of matters. The legs just went out, and people said to themselves, 'There's a problem here.'"

But he still holds hope for near future.

"There are all kinds of things going on that make us think we're in a transition and things are going to turn around," Glassman said.

One area he pointed to is the oil crisis-and the fact that oil prices are still somewhat low compared to their Summer 2007-Summer 2008 peak.

"If we'd known oil prices were going to explode the way they did, we pretty much would have told you that the surge in oil prices would slow us down by 1 or 2 percent," Glassman said. "The point of this picture is to remind you that this oil phenomenon was once a headwind, but now it's a tailwind."

Glassman also addressed the credit market.

"The second reason to be optimistic is that if credit shut down production last fall, the opening of credit and the normalization of credit flows is going to release some pent-up demand," he said.

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