Despite many headwinds, the housing recovery is expected to pick up in the next year.
“The cards are in play for a decent and fairly strong recovery in 2014 and particularly in 2015,” says David Crowe, chief economist for the National Association of Home Builders. “From the standpoint of GDP growth, housing has been a plus, growing at two, three, and four times the rate of the rest of the economy in recent quarters.”
Crowe made the statements during the Fall 2013 Construction Forecast webinar, hosted by NAHB last week. He noted that a double-digit increase in home prices over the past year has helped spur a housing rebound. But Crowe warned that the steep price increases won’t last forever.
“We expect to see price increases moderate in the next few years as we see additional inventory on the market and investors back away as the bargains disappear,” Crowe said.
The growth in household formations is a bright spot aiding the recovery, economists noted during the webinar. During the recession, household formation growth was delayed as young professionals moved back home with their parents or doubled up with roommates.
During the height of the housing boom, the U.S. was producing 1.4 million additional households each year. However, during the recession, that figure dropped to 500,000 per year. Today, the figure has risen to 700,000.
Still, plenty of challenges remain to the housing recovery, economists note.
“Credit conditions are much tighter now, builders are increasingly facing labor shortages, lot supplies are tight, building material prices are rising, and inaccurate appraisals are hurting home sales.” Crowe said. “You can’t charge more than you can get an appraisal for. Even though we are seeing price increases in labor, land, and materials, 36 percent of builders recently said they had lost at least one sale over appraisals coming in below the cost of production.”
NAHB made some of the following projections in housing starts:
- Housing starts in 2013 are projected to reach 924,000—up 18 percent from last year.
- Single-family housing starts are expected to rise 17 percent this year and an additional 31 percent next year. NAHB projects that single-family production will surpass the 1 million mark in 2015.
- Multifamily starts are expected to rise 20 percent in 2013 and another 10 percent in 2014. Crowe characterized that as a “normal level” of multifamily production.