Survey Says Home Builders Are Cautiously Optimistic, But Don’t Expect to Hit 1 Million Units Sold Per Year Anytime Soon

Opportunity follows struggle. It follows effort. It follows hard work. All will be needed to keep the construction sector marching forward in 2012, with expanding opportunities for next year. Some bright news over the last month has increased optimism — a Highway Bill signed, increased in multi-family housing, states collecting more taxes — all of these things have homebuilders more optimistic.

A survey of chief financial officers and tax directors at more than two dozen major U.S. homebuilders revealed cautious optimism that the single family home market is poised for another period of growth. The survey, based on responses received through April 15, 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 homebuilding sector was rocked by the downturn, but in the last two years of polling key executives, we’ve witnessed a return to equilibrium,” explained Steve Friedman, U.S. homebuilding co-leader for Ernst & Young LLP. “The general consensus of the industry seems to be that while there are still challenges to face, the stage is set for expansion to resume sometime in the next 24 months.”

The Ernst & Young LLP survey, which polled private and public homebuilders, shows that nearly 85 percent expect their companies to break even or realize net income in 2012. This is a sharp increase over last year, when 71 percent of respondents expected to break even or better, and even more markedly optimistic than 2010, when 52 percent of companies polled expected to make a net loss on the year.

Homebuilders are bullish about 2013, with almost 95 percent of respondents projecting break even or net income gains next 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. In fact, a majority of respondents (59 percent) don’t expect U.S. home sales to hit the benchmark one million units sold on an annualized basis until 2015 or 2016 — where last year, 54 percent thought they would hit the benchmark in 2014 or 2015. To download the complete survey results, visit www.ey.com/us/realestate.