The National Association of Home Builders held its annual Fall Construction Forecast Webinar Oct. 21, where economists predicted a strong increase in the amount of new single-family homes built in the next two years.
Using data extrapolated from 1990, Robert Denk, a senior economist at NAHB, said the average number of single-family starts in a given year is 1.3 million, which was the mark in the early 2000's. The amount of home starts jumped to 1.7 million in 2006 and then sank to about 350,000 in 2009 after the housing bubble burst. Since then, housing starts have risen, and currently, Denk said, the market is churning out around 740,000 of them–-53% of the long-term average.
NAHB Chief Economist David Crowe credited the housing recovery to an increase in jobs since 2010. If people continue to be put back to work, Crowe said, “the housing market will continue to move forward.” He did note, though, that a far majority of the gains in the employment sector have come in service-producing rather than goods-producing industries, where employees are paid higher wages.
Denk estimated that home starts would surpass one million in 2016 and 1.2 million, or 91% of the average, in 2017. “2016 has a lot of potential to accelerate the recovery,” he said, adding that the economy is no longer about the “carnage” that caused the collapse. “It’s about population and job growth,” he said. “We’re really in a very different place than we were in the early rounds of the recovery.”
NAHB Forecast Webinar 2015
When asked why he expects home starts to rise in the coming years, Denk said there’s pent-up demand for housing production. Since there have been so few homes built since the recession, he added, “How long can we go without people demanding additional housing?”
Looking at the forecast on a state-by-state basis, Denk predicted that the top 40% of states would return to more normal levels of housing production by the end of 2017. On the bottom end of the spectrum, the bottom 20% percent of states will be below 73% of normal production at the same time.
Where are people
looking to buy?
Housing Economist Ralph McLaughlin, of Trulia, shared survey findings depicting what Americans want out of a living space and where they see themselves living in the future. Home buyers, McLaughlin said, prefer modern and modest-sized homes in the suburbs with amenities like decks, balconies and gardens.
And, according to U.S. Census data, McLaughlin reported that home buyers are moving to the suburbs, adding that the notion of people looking to live in urban areas and rent, which has been the trend in recent years, “was more a blip than a long-term trend.”
projected to climb
Though mortgage rates are currently below 4%, Crowe predicts a sharp rise in the near term-–4.5% rates in 2016 and 5.5% in 2017. Since the economy has gotten better in recent years, and should continue to grow according to NAHB projections, mortgage rates should follow, Crowe said.
For the generation of millennials now in their 20s and 30s, buying a home is on the horizon and higher mortgage rates could have an impact. The topic of those millennials living with their parents longer and putting off getting married was also a focus of Crowe’s.
The share of 20 to 34 year olds getting married has dipped steadily over the years, he said, and so too has the share of 25 to 34 year old homeowners, especially since 2007, and that's no coincidence. “Marriage is a strong correlation to homeownership,” Crowe said.