Ernst& Young: Builders cautiously optimistic about housing industry

By Rob Starr, Content Manager, Big4.com

A new Ernst & Young survey, based on responses received through 15 April 2012, paints a picture of an industry especially hard hit by the economic downturn but which has now achieved stability and is preparing for expansion. The Ernst & Young LLP survey, which polled private and public homebuilders, shows that nearly 85% expect their companies to break even or realize net income in 2012. This is a sharp increase over last year, when 71% of respondents expected to break even or better, and even more markedly optimistic than 2010, when 52% of companies polled expected to make a net loss on the year.

The biggest impediments to sales growth this year perceived by homebuilders are consumer confidence and the ability of potential buyers to sell their current homes. Consumer confidence has always been a big factor for homebuilders in anticipating sales growth, according to the survey. However, in this year’s survey, concerns over interest rates presenting an impediment seem to have diminished. But other major impediments that were cited by respondents in the last two years: interest rates and the ability of buyers to obtain mortgage financing seem to have diminished, according to this year’s survey. Nevertheless, a majority of respondents (59%) don’t expect US home sales to hit the benchmark one million units sold on an annualized basis until 2015 or 2016 – where last year, 54% thought they would hit the benchmark in 2014 or 2015.

Respondents indicated that the West Coast, Texas and Southeast markets are expected to be the most profitable for most homebuilders this year. And when asked which markets they expected to be least profitable, most respondents chose the Southwest, West Coast, Midwest and Southeast, demonstrating how homebuilders can view some of the same markets quite differently.