From the Asbury Park Press:
Housing starts in New Jersey are forecast to drop nearly 20 percent this year, according to the head of the state home builders association, but the market could show signs of improvement in the second half of 2007.
Patrick J. O’Keefe, chief executive officer of the New Jersey Builders Association, expects about 27,000 houses to be built, compared with the 33,400 that were built in 2006 and the 37,980 that were built in 2005.
“We are now at the nadir,” O’Keefe told a meeting of the Shore Builders Association of Central New Jersey on Wednesday night. “We are now starting to see a bottom form.”
The sale of new houses is linked to the existing-home market because most new houses are bought by people who have to sell their old houses before they can buy new ones.
But sales of existing homes slumped in 2006. Prices got too high for a lot of buyers, and when homeowners who wanted to move up into new houses couldn’t sell, the new-home market suffered.
For builders to sell houses, there has to be some changes in the existing-home market, O’Keefe said.
“They (homeowners) continue to believe they are going to get what their neighbor across the street got in the first half of 2005. That market is not there anymore,” O’Keefe said. “Individual sellers are only now beginning to understand that the market has changed.”
In the second half of the year, O’Keefe said he expects new-home buyers who have adjusted their expectations of how much they will receive for their current homes will come back into the market.
“2007 is not going to be a great year, but it is a year where we are going to see a turnaround,”
O’Keefe said. “For those who are nimble, for those who are competitive, for those who are creative, it should also be a year of profit.”
The year’s forecast of 27,000 new homes in New Jersey is the level of new construction in 2001, O’Keefe noted.