David Goldberg, UBS’s home-builder analyst just released their predictions for the 2012 housing industry. Mr. Goldberg says housing will have a modest recovery this year. He told the WSJ – “I’m more bullish today than I have been in the last five years.”
Here are UBS‘s predictions:
Prediction #1. Single family housing starts will grow by approximately 5-10% in 2012, marking the first year in seven that starts will have grown meaningfully on a y/y. Multifamily starts will accelerate at a faster pace; leading total starts up 10-15%.
Prediction #2. Community count growth will range from 5-10% y/y, with public builders order growth of 15-20% y/y.
Prediction #3. New home pricing will be flat in 2012 while distressed prices have basically bottomed.
Prediction #4. Mortgage underwriting will not loosen until 2013; when they do, look for private lenders rather than GSEs (Fannie, Freddie & FHA) to lead the way.
Prediction #5. Government support for the new home market will be slightly better than “do no harm”. Future efforts will focus on the existing home market.
Prediction #6. While many believe that record affordability should drive sales, mortgage availability will constrain owner occupied demand over the next couple of years.
Prediction #7. No significant book value erosion in 2012. Some companies will lose money, driven by financial leverage. In some better-positioned companies book value could increase for the first time since the downturn.
Prediction #8. Shares of home builders will see higher highs and lower lows as expectations reset. Influencing forces include: 1) land scarcity; 2) a more robust recovery; and/or 3) differences in valuations.
Prediction #9. 2012 will not see Public=to-public M&A activity.
Prediction #10. Although the long term trends for housing are likely positive, we have less conviction in the near term demographic story. In fact, we believe there are likely trends that will work against an acceleration in homeownership in the near term.