Economic forecasters at the University of Hawaii are cautiously predicting an improvement in the state’s construction industry in 2012, mindful that a recovery they expected in the sector last year never materialized.
A modest improvement in Oahu’s housing market combined with higher spending on government projects should provide support for both private- and public-sector construction this year, according to a report released by the University of Hawaii Research Organization.
"Construction has yet to turn the corner in Hawaii, but a pickup is now more clearly in sight," the report’s authors wrote. "We are more confident that a movement upward is now imminent and we believe this forecast is more likely to understate than overstate activity over the next few years."
UHERO’s forecast for 2012 includes an increase in construction jobs for the first time in four years, a 3.1 percent rise in income generated by construction projects and a 2.8 percent increase in the median single-family home price on Oahu to $592,100.
"A flurry of announcements of high-rise condo plans on Oahu, resort-related construction — and yes, rail and other large-scale public projects — will begin to raise the level of activity in the sector this year," according to the report. "And that will build going into 2013. An abrupt halt to rail plans could of course derail some of this growth, although significant private building would still stir the industry."
The researchers acknowledged that economic forecasting is not an exact science, as evidenced by their overestimation last year regarding the outlook for construction.
"We got ahead of ourselves last year," they wrote. "The beginnings of a construction recovery that we had anticipated failed to materialize."
While UHERO’s outlook for 2012 is upbeat, a major downside is that much of the expected improvement is on Oahu, with few benefits filtering through to the neighbor islands. Hawaii island, Kauai and Maui, which experienced a housing boom in the last decade, still face an excess inventory of unsold homes and more severe foreclosure problems that will hold back a quick recovery of residential construction, according to the UHERO report.
"It will take some time for building conditions to improve outside of Honolulu," the report said.
The positive forecast for Oahu’s housing market is bolstered by the fact that the inventory of single-family homes and condominiums had fallen to five months’ worth of supply at the end of 2011. That was down from 12 months’ supply during the financial market meltdown in the fall of 2008.
"As the job picture improves and income gains are made, rising home demand will push against available supply and home prices will begin to rise," the researchers wrote.
However, the continuing mortage foreclosure problem remains a risk, according to the report. Delinquent homeowners are likely to be hit by another wave of foreclosures in coming months, the report said.
