As executive director of Hanley Wood Market Intelligence (HWMI), Jonathan Smoke helps run one of the nation’s premier collectors and analyzers of housing data. He also produces HWMI’s housing startsforecasts and created indexes on the nation’s healthiest markets and busiest places for new homes and residential remodeling. He spoke with ProSales editor Craig Webb.

ProSales: What are HWMI’s expectations for new home construction?

Smoke: We continue to build upon the recovery that began this year. We are expecting greater gains in single-family starts than we’ve seen so far. The recovery will be widespread: Of the 940 local markets we track, each covering areas with a population of 20,000 and above, HWMI predicts 513 will see improving conditions in 2013, 162 will be flat, and 265 will see declines in sales, usually in the single-digit percentage range.

What about remodeling?

It too will see continued, and stronger, gains in project activity in 2013. Out of 366 Metropolitan Statistical Areas, HWMI predicts 362 will see an increase in activity next year, three will be flat, and just one will decline: Hanford-Corcoran, Calif.

What kind of customer mix do you expect?

We expect more growth in move-up, custom and active adult categories than in entry level. The new-home market is generally skewed to older and higher-income buyers and these are the buyers least impacted by finance challenges. We also expect active adult to be strong and vibrant for years to come as baby boomers look to and start entering retirement.

We’ve heard optimistic predictions before. Why shouldn’t we be wary?

Since the end of 2011 we’ve had dramatic fundamental improvements. We’ve seen real, substantial improvements in distress overhang; we are seeing prices appreciate, which hasn’t occurred since the housing downturn began; and we are seeing real demand to buy the limited homes on the market today. Unlike a few years ago, this isn’t demand being spurred by temporary tax incentives.

Will we ever return to the multi-million starts of a few years ago?

For the next two years we think we'll climb above 600,000 new-home starts and approach 800,000. I think it will take us until 2015 to cross 1 million again, and then I expect the growth will taper off to a long-term range of 1 million to 1.3 million a year. I’m very skeptical of any long-term forecasts expecting single family homes to rise above 1.5 million units on a sustainable basis.

What do experts like Smoke take into account when making their forecasts? What numbers should you track for your own market? Click here for answers plus more from this interview.

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