U.S. housing starts came in at an annualized pace of 923,000 in the first quarter, missing UBS’s expectations for 1.06 million units.
But UBS’s Maury Harris attributes this to the exceptionally cold winter saying.
Harris and his team now expect a spring rebound in housing starts.
He raised his Q2 forecast to a 1.15 million annual pace, compared to previous expectations for 1.10 million starts.
Harris also boosted his Q3 projection to 1.22 million, from 1.15 million. Finally, he maintains his full-year forecast for 1.15 million units.
Not everyone is as optimistic. Bank of America recently cut its housing forecast.
Those arguing for slower pace of housing starts point out that mortgage rates are higher than a year ago and that affordability is declining.
But “it is worth emphasising that our housing starts forecasts follow exceptionally low levels in recent years and are well below the previous cyclical peaks,” Harris said.
“Our updated 900,000 single-family starts forecast for 2015 is only around 52% of its previous cyclical peak 10 years earlier, and our overall 1.35 million unit housing starts forecast for 2015 is still just 65% of its previous peak a decade ago,” Harris said.
That being said, the mix of housing starts is shifting toward more multifamily starts than single-family starts. Harris now sees single-family starts of 725,000 units in 2014, down from an earlier forecast of 825,000. He also expected 425,000 multi-family starts, up from the earlier estimate of 325,000 units.
Here’s the chart that shows just how severe this winter was:
Meanwhile, here’s the chart that shows that housing starts have much more room for recovery: