A growing economy, rising household formations, low mortgage rates and pent-up demand will help single-family housing production to rev up in 2015 while a growth in renters will keep the multifamily market at cruising altitude or higher, according to economists who participated in yesterday’s National Association of Home Builders (NAHB) 2014 Fall Construction Forecast Webinar.
Here’s what the economists had to say:
NAHB Chief Economist David Crowe
- The single-family sector will finish out the year much stronger than it began and set the stage for a robust 2015.
- This is mostly due to significant pent-up demand and steady job and economic growth that will allow trade-up buyers who have delayed home purchases due to job insecurity to enter the marketplace.
- Single-family production is expected to rise 2.5% this year to 637,000 units, increase an additional 26% next year to 802,000 and reach 1.1 million units in 2016.
- Multifamily starts, which are now at a normal level of production, are projected to increase 15% in 2014 to 356,000 units and hold steady next year.
- Strong job growth means that the prospects are good for continued gains in overall economic and housing activity.
- The current supply of housing is running just over 1 million units on annualized basis, well below the 1.7 million units needed for the longer run.
- Mortgage rates will rise from their current rate of about 4% to 6% by the end of 2017, but the housing market will be fine because of better employment, higher wages and solid economic growth.
- Single-family starts could be closing in on 1 million units by the end of 2015 and multifamily production could go as high as 500,000 units.
- Job growth and housing go hand-in-hand.
- Energy-producing states — North Dakota, Texas, Louisiana, Montana and Wyoming –where job growth is strong are also at the forefront of the housing recovery while Iowa and other farm belt states supported by agricultural commodities are also running above the nationwide average.
- Meanwhile, states such as Nevada, Arizona, New Mexico, Alabama, Rhode Island and New Jersey that are coping with weak labor markets are also struggling to get their housing activity back on track.
- By the end of 2016 the top 40% of states will be back to normal single-family production levels, compared to the bottom 20%, which will still be below 75%.