The National Association of Home Builders issued its monthly report on new home construction this morning, and the figure for new construction rose its highest level since June 2008. John Burns was not surprised. Burns, who is CEO of the real estate consulting firm that bears his name, started his career as a CPA almost 30 years ago and has been a participant and observer of the national real estate business for more than 20 years. His university degrees are in Economics (BA, Stanford) and (MBA, UCLA). He is one of the Bloomberg business network’s go-to guys on housing issues. And he is bullish on the housing market. Very bullish.
Burns, in referencing his latest appearance on Bloomberg, wrote on the business website LinkedIn, that “I … sent (I hope) a wake-up call to the Fed. If mortgage rates stay at 3.5% for several years, I believe home prices will skyrocket. Potential homebuyers can purchase a 34% more expensive home today than they could at the end of 2008. With supply now dwindling, it is a seller’s market, and price appreciation is only limited by what people can afford to pay every month.”
The West and South Rise Again
On the Bloomberg show, Burns pointed to the South and West as the regions with the most explosive growth, and he predicted prices could increase 40% or more over the next few years, compared today’s prices. As we pointed out here a few days ago, new home construction is something of a self-fulfilling predictor of higher prices; all those newly hired workers need places to live, and even if they don’t buy the homes they build, they buy the homes of others looking to move up to the new homes.
One of Burns’ associates recently posted an article at the firm’s blog site under the title “Florida is on fire.” About home prices, she wrote, “In markets like Orlando and Naples, new home prices are increasing approximately 1%-2% per month in many communities. Lotteries are back. We are projecting double-digit home price appreciation in many Florida markets for 2013.”
But just last month, market watcher Clear Capital’s director of research wrote that, "Florida metros, namely Miami, Orlando, Tampa, and Jacksonville, were all missing from the top 15 performing market list. Since September 2011, at least one of these markets made the list. While this isn't confirmation that the recovery is finished in the sunshine state, it's certainly something to keep an eye on. These markets led the recovery in late 2011, and share some of the hallmarks for recovering markets overall."
Golf Community Pricing Still Reasonable…for Now
If Burns, his colleagues and other housing bulls are right, and this latest run is not a “bubble,” the implications for golf community buyers are obvious. Although no one should ever make a big buying decision like a new home based solely on market forecasts –- recall how bullish some forecasters were in 2007 -- many folks have no reason to dally and take the chance that the golf home they might want today will be less affordable a year or two from now. If you believe that sheer demographic shifts within the nation and migration from north to south will continue to push prices up fastest in the southern U.S., then your home up north will never be worth as much relative to the home you will buy in the south. In short, even if prices in some areas of the north increase, in most areas of the south they will increase faster. (If you would like us to compare the current market value of your home with the current price of a comparable home in a southern market of your choosing, please contact us.)
If you would like to see the Bloomberg appearance of John Burns and a panel of other housing industry observers, click here.