Metrostudy Forecasts Additional 47 Percent Drop in Home Starts in 2009

HOUSTON--(BUSINESS WIRE)--Builders slashed new-home production in 2008, and will scale back further in 2009, according to a new study by Metrostudy, a national housing market research firm. “The cutbacks thus far have been in response to high inventories and low consumer demand, and those trends will remain in place through most of this year,” said Brad Hunter, Metrostudy’s chief economist and national director of consulting. Established 34 years ago, Metrostudy conducts a quarterly 100-percent count of actual housing starts and inventory in 81 Metropolitan Statistical Areas across 19 states.

“South Florida’s quarterly starts declined 96.5 percent from their peak, and Naples-Fort Myers quarterly starts fell 92.9 percent from their peak, as of the end of the fourth quarter of 2008”

Metrostudy has called for diminished production in order to reduce new-home inventories in the market, which remain excessive in almost every local metropolitan area in the United States. “Absorption of the standing vacant inventory is key to finding a price bottom. Our forecast for 2009 is that starts will fall 47 percent to nearly half the level of 2008, which amounts to 483,000 total starts for the calendar year, in order to reduce inventory to an acceptable level,” Hunter said. This decline would be in addition to the 33 percent drop from 2007 to 2008, and is steeper than many other housing economists have predicted. “Some forecasts have been unrealistically high; however, is important for suppliers of all types that a fact-based analysis be used,” Hunter said. Metrostudy’s research suggests that starts could hit 500,000 in 2009, but forecasts of 600,000 to 700,000 are unlikely to be met.

Metrostudy conducts its own count of builder starts in subdivisions, and is able to report activity within 81 Metropolitan Statistical Areas and 280 counties. The company’s latest numbers, for the final quarter of 2008, indicated significant variation among markets. “South Florida’s quarterly starts declined 96.5 percent from their peak, and Naples-Fort Myers quarterly starts fell 92.9 percent from their peak, as of the end of the fourth quarter of 2008,” Hunter said. The smallest percentage decline from the peak observed by Metrostudy was in Austin (66.1 percent).

Hunter also finds that the government’s “headline” housing starts numbers have long been overstated, based on Metrostudy’s actual counts of housing starts. The government numbers are based on a sampling of housing permits, not all of which translate into starts, particularly in today’s environment, he said. In contrast, Metrostudy’s 600 researchers drive to each homesite in every subdivision in the markets the company surveys and check to see whether a foundation for a home has been poured. The Census Bureau and U.S. Commerce Department do not do that.

Metrostudy adds to the analysis with inventory numbers the company collects at the subdivision level. “Finished vacant inventories are actually being reduced, but they remain too high in most markets,” Hunter said. “Florida leads the nation as the most overbuilt, with 12.6 months of finished vacant inventory in South Florida, 10 months in Naples-Fort Myers, and 9.2 months in Central Florida.” These readings are all far in excess of the equilibrium level of 1.5 to 2.5 months that Metrostudy considers normal in a healthy market. Only San Antonio and Baltimore are presently in a normal range for this measure.

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing industry and related industries nationwide. In addition to providing its own primary housing data collected by a staff of 600, the company is recognized for its consulting expertise on development, marketing and economic issues, and is a key source of research studies evaluating the marketability of residential and commercial real estate projects. Services are offered through an extensive network of offices located in major metropolitan areas throughout the U.S. For more information, visit www.metrostudy.com.