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Originally published Friday, February 11, 2011 at 10:01 PM

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Homebuilders look for warm-weather bounce

Bloomberg News

BOSTON — Homebuilder executives and economists predict a post-Super Bowl bounce in demand for residential construction as Americans turn their attention from football to another national pastime: house hunting.

The chief executives of six of the 10 largest U.S. homebuilders, during conference calls in the last four weeks, cited the potential of a sales comeback in the spring, traditionally their strongest season.

Housing forecasts from Fannie Mae and the Mortgage Bankers Association show the new-home market will begin a rebound that will last through at least 2012.

Record low sales

A revival in demand for new houses after record-low sales in 2010 may bolster an economy that's 19 months into a recovery. Residential construction is a key factor in gross domestic product because it requires the manufacturing of home components such as stoves, cement, tile and furnaces.

Richard DeKaser, an economist at Boston-based Parthenon Group, said he expects the home-building industry will this year make its first positive contribution to GDP since 2005.

"The spring market is going to be the first test of the proposition that there's an underlying improvement in new-home fundamentals," DeKaser said. "If we don't see the needle move, it will be very discouraging."

New-home sales probably will rise 20 percent to 385,000 this year, said David Crowe, chief economist for the National Association of Home Builders in Washington, D.C. Fannie Mae, the world's largest mortgage buyer, projected an 18 percent gain, and the Mortgage Bankers Association estimated a 10 percent advance, according to forecasts posted on their websites.

D.R. Horton, the second-biggest builder by revenue, is "locked and loaded" to meet an upswing in demand, Chief Executive Donald Tomnitz said last month on a conference call. He said he is "anticipating a much better spring-selling season" than last year.

The optimism couldn't have come at a darker moment for the new-home market. The number of newly constructed houses sold per month fell to 20,000 in November, the fewest of any time in 47 years of Commerce Department data.

The tax credit that boosted sales at the start of last year is gone, and cut-rate prices on foreclosures are drawing buyers to existing properties.

Tougher loan requirements by banks may also limit demand. At 2010's end, lenders tightened mortgage-credit standards by the most in three years, according to the Federal Reserve Senior Loan Officer Survey.


Borrowing costs also are on the rise after the average rate for a 30-year fixed mortgage fell to a record 4.17 percent in November, based on data from Freddie Mac.

Popular time

Spring is a popular time to buy because house hunters often want to have their home finished by July or August, before the start of the school year in September, said John Burns, CEO of John Burns Real Estate Consulting in Irvine, Calif.

The weekend after the Super Bowl is traditionally when prospective buyers start looking, he said.

"If that's a good weekend for the builders, then we're going to have a good spring, and if we have a good spring, we'll have a good year," Burns said. "That's the way it's played out for years."

In 12 of the last 14 years, the annual peak in new-home sales occurred in March or April, according to Commerce Department data.

The Commerce Department counts sales at the time of contract, while homebuilders book revenue once the transaction is completed.

"The contracts the builders will be writing in the next few weekends will be a leading indicator of their closings for later in the year," Burns said. "It's probably going to be a good year — not a great year."

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