David Crowe Predicts 2016 Market

Hear what National Association of Home Builders Chief Economist and Senior Vice President Dr. David Crowe has to say about the housing market in 2016. Hint: when David Crowe wears a pink tie, he is optimistic.

Positive Outlook for Housing Market

A firming economy, solid job growth, rising consumer confidence, higher household formations and pent-up demand are helping to bring buyers back into the marketplace, and these factors will bode well for housing in 2016, according to economists speaking at the NAHB International Builders’ Show in Las Vegas.

“There are a number of positive indicators that provide solid evidence this will be a good year for housing and the economy,” said NAHB Chief Economist David Crowe.

Private sector job growth has been averaging 240,000 per month over the past two years, GDP growth is expected to climb slightly above last year’s level and consumer confidence is nearly back to its pre-recession peak, Crowe noted.

Builders report their top concerns in 2016 include the cost and availability of developed lots and labor, federal environmental regulations and policies that are making it more expensive and difficult to build homes, and building materials prices.

Solid Gains for Single-Family Production
NAHB is forecasting 1.26 million total housing starts in 2016, up 13.4% from a projected 1.11 million starts in 2015.

Single-family production is expected to reach 840,000 units this year, an 18 percent increase from a projected tally of 711,000 units in 2015. Using the 2000-2003 period as a healthy benchmark when single-family starts averaged 1.34 million units on an annual basis, Crowe said the ongoing housing recovery will see single-family starts steadily climb from 55% of normal production at the end of the third quarter of 2015 all the way up to 87% of normal by the end of 2017.

On the multifamily side, NAHB is anticipating 417,000 starts in 2016, up 5% from an expected total of 397,000 units last year.

Meanwhile, residential remodeling activity is expected to register a 1.1% gain this year over 2015.

A Bright Regional Outlook – With One Exception
Delving below the national numbers, David Berson, chief economist at Nationwide Insurance, said that most regional housing markets look healthy.

Labor market conditions, a key driver of housing demand, are strong in many metropolitan statistical areas (MSAs) – supporting faster household formations and boosting local housing activity through rising incomes. These factors indicate that most of the 400 local housing markets “should see sustained growth in the coming year,” Berson said.

With the unemployment rate declining in 90 percent of the MSAs over the past year, Berson said that the housing fundamentals are the strongest in over a decade, a trend supported by the labor market, demographics and consumer preference to own.

However, Berson noted that many MSAs with strong ties to energy exploration and production in states including Louisiana, Texas, Wyoming and South Dakota are expected to see limited housing expansion in the near term, as low oil prices are reducing employment.

Mortgage Rates: From ‘Cheap’ to Low
Frank Nothaft, chief economist of CoreLogic, foresees solid fundamentals for housing in 2016. With 30-year fixed-rate mortgages running at or below 4% during the past year, Nothaft called them “cheap.” He said mortgage rates are expected to gradually rise one-quarter to one-half a percentage point this year up to 4.5%, going from “cheap to low.”

Nothaft added that overall home sales will rise 4-5 percent in 2016, led by a 13 percent gain for new home sales, with sales volume and growth strongest in the South and West. “There is stronger growth in households, population and demand for new housing” in these regions, he said.

Nationwide home prices this year will increase about 4-5% above last year’s level and are projected to reach the 2006 peak by mid-2017, Nothaft said. Tight mortgage credit for consumers is expected to ease slowly this year, but remain relatively tight compared to 15-20 years ago.

New Home Sales Rise 4.3% in November

Sales of newly built, single-family homes rose 4.3% to a seasonally adjusted annual rate of 490,000 units in November, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“It is encouraging to see new-home sales continue to tick upward,” said NAHB Chairman Tom Woods. “Builders are also increasing their inventory even as they face difficulties accessing lots and labor.”

Regionally, sales rose 20.5% in the West and 4.5% in the South. Sales fell 28.6% in the Northeast and 8.6% in the Midwest.

“Limited gains in new-home sales can be attributed to a weak existing sales report,” said NAHB Chief Economist David Crowe. “People who already own a house comprise most of the new residential construction market, and they often must sell their existing home before making another purchase.”

The inventory of new homes for sale was 232,000 units in November. This is a 5.7-month supply at the current sales pace. This increase in new home sales shows the continuation of growth in the industry.

New Home Sales Drop in September

Sales of newly built single-family homes fell 11.5% to a seasonally adjusted annual rate of 468,000 units in September, according to newly released data from HUD and the U.S. Census Bureau.

“Despite this monthly drop, our members continue to tell us that housing is moving in the right direction,” said NAHB Chairman Tom Woods. “Consumers may have simply been reacting to soft job numbers.”

“It is not surprising to see sales pull back in September following a strong August reading, especially after a few months of weak job creation,” said NAHB Chief Economist David Crowe. “However, new-home sales year to date are up 17.6% compared to the same period of 2014, and we expect the market to continue improving at a gradual but steady pace for the rest of year.”

Regionally, new home sales were down across the board. Sales fell 61.8% in the Northeast, 8.3% in the Midwest, 8.7% in the South and 6.7% in the West.

The inventory of new homes for sale was 225,000 units in September. This is a 5.8-month supply at the current sales pace.

Economists to Discuss Housing Outlook at Upcoming Webinar

Crystal balls and magic 8 balls will not be used. Rather, industry experts will rely on hard data, notable trends and key insights as they discuss the housing outlook for 2016 and beyond during the Fall Construction Forecast Webinar.

NAHB will host the semi-annual event tomorrow Wednesday, Oct. 21, from 2-4 p.m. ET. Leading economists and finance experts will examine some of the most pressing issues in housing, including:

• Predictions of housing’s path in 2016-17
• Hurdles regarding labor and land shortage
• Changes in demographics and demand
• Actions and impacts of the Federal Reserve

During the webinar, NAHB chief Economist David Crowe, NAHB chief economist, will break down complex concerns impacting the building industry. Robert Denk, NAHB’s assistant vice president for forecasting and analysis, will then present a state-by-state analysis of key areas such as housing prices, starts and employment.

Trulia Housing Economist Ralph McLaughlin will also join as a special guest. McLaughlin’s specialties include housing economics, land use and housing policy, and industrial geography.

Participants will be able to submit their questions online throughout the webinar.

For more information and to register, go to nahb.org.

Builder Confidence on the Rise in October

Builder confidence in the market for newly constructed single-family homes rose three points in October to a level of 64 on the NAHB/Wells Fargo Housing Market Index (HMI). This month’s reading is a return to HMI levels seen at the end of the housing boom in late 2005.

“The fact that builder confidence has held in the 60s since June is proof that the single-family housing market is making lasting gains as more serious buyers come forward,” said NAHB Chairman Tom Woods. “However, our members continue to tell us there are still pockets of softness in some markets across the nation, and that they face challenges regarding the availability of lots and labor.”

“With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015,”said NAHB Chief Economist David Crowe. 

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two of the three HMI components posted gains in October. The index measuring sales expectations in the next six months rose seven points to 75, and the component gauging current sales conditions increased three points to 70. Meanwhile, the index charting buyer traffic held steady at 47.

Looking at the three-month moving averages for regional HMI scores, all four regions posted gains. The West registered a five-point uptick to 69 while the Northeast, Midwest and South each rose one point to 47, 60 and 65, respectively.

New Home Sales Rise 5.7 Percent in August

 Sales of newly built, single-family homes rose 5.7% to a seasonally adjusted annual rate of 552,000 units in August from an upwardly revised July reading, according to newly released data from HUD and the U.S. Census Bureau.

“We continue to hear from our members that more serious home buyers are returning to the market,” said Tom Woods, chairman of the National Association of Home Builders (NAHB) and a home builder from Blue Springs, Mo. “Builders are gradually adding inventory to meet future demand as they handle shortages of lots and labor.”

Regionally, the Northeast, South and West posted respective gains of 24.1 percent, 7.4 percent and 5.4 percent. The Midwest registered a 9.1 percent decline. The inventory of new homes for sale was 216,000 units in August. This is a 4.7-month supply at the current sales pace.

“Today’s report indicates the release of pent-up housing demand as the overall economy strengthens, consumer confidence grows and mortgage interest rates remain low,” said NAHB Chief Economist David Crowe. “The housing market should continue to move forward at a modest but more persistent pace throughout the rest of 2015.”

Article courtesy of nahbnow.com

NAHB: Housing Recovery Slow and Steady in 2015, Will Pick Up Pace Next Year

Solid employment gains, attractive mortgage rates, a growing economy and pent-up demand will help keep the housing market moving forward throughout 2015 and into next year, according to economists who participated in yesterday’s NAHB 2015 Spring Construction Forecast Webinar.

“This should be a good year for housing, buoyed by sustained job growth, rising consumer confidence that is back to pre-recession levels and a gradual uptick in household formations,” said NAHB Chief Economist David Crowe. “We expect 2016 to be even better, due to a significant amount of pent-up demand and an economy that will be entering a period of reasonable strength and consistency.”

Over the past seven years, Crowe estimates the slow recovery and uncertainty in the job and housing markets resulted in 7.4 million lost home sales. “While some of these sales will never take place, this does indicate how many sales were lost as fewer households decided to move. We expect at least some of these to return in the form of new home sales as job and economic growth continue to firm.”

A key demographic to help jump-start this process should come from the millennials.

The share of first-time home buyers has traditionally averaged around 40% but in the aftermath of the housing downturn it now stands at just under 30%. First-time buyers are expected to provide a boost to the housing market, as the unemployment differential between young people and others is shrinking, Crowe noted.

Single-Family on the Rise
Turning to the forecast, the NAHB Remodeling Market Index, which averages ratings of current remodeling activity with indicators of future activity, stands at 57 in the first quarter of 2015 and has been at or above 50 most of the past two years. A reading above 50 indicates that more remodelers report market activity is higher (compared to the previous quarter) than report it is lower.

NAHB is projecting that residential remodeling activity will increase 2.3% in 2015 over last year and rise an additional 2.4% in 2016.

Single-family housing production is expected to post a 9% gain in 2015 to 704,000 units and jump an additional 39% to 977,000 units in 2016.

On the multifamily side, production ran at 355,000 units last year, which could be considered a normal level of production, and is expected to continue in that range or modestly higher through 2015 and 2015.

New Home Price Growth Fastest in Coastal Areas
Focusing on new home sales, Sam Khater, deputy chief economist at CoreLogic, said that sales volume is weak, but pockets of strength exist.

“New home price growth is fastest in the coastal states and eight of the top 10 healthiest new sale markets are in the Carolinas and Texas,” said Khater.

Of the top 100 new-home sale markets, Houston leads the pack at 2,000 sales per month, followed by Dallas and Atlanta, which are running at about half that pace. In terms of volume, the bulk of the concentration is in southern markets.

“Nashville and San Jose stand out as the fastest growing markets and Atlanta and San Antonio are the best large markets,” said Khater.

Only three new-sale markets are larger today than in 2000 – Nashville, Oklahoma City and San Antonio.

“We Really Have Turned the Corner”
Also delving beneath the national numbers, NAHB Senior Economist Robert Denk said that the housing recovery continues to vary by state and region.

“Housing demand is now being driven by population growth and employment and income growth,” said Denk. “We are reconnecting to underlying fundamentals. We really have turned the corner.”

The strongest housing markets are centered in several energy-producing states, including North Dakota, Texas, Oklahoma, Louisiana, Wyoming and Idaho.

“The recent decline in oil prices is not hurting housing,” said Denk. “We haven’t seen it yet. We still expect energy output to be higher at the end of this year than last year.”

Other states exhibiting strong employment and housing growth include North Carolina, South Carolina, Tennessee, Washington and Colorado.

Using the 2000-2003 period as a healthy benchmark when single-family starts averaged 1.34 million units on annual basis, NAHB is projecting that single-family production, which bottomed out at an average 27% of normal production in early 2009, will rise to 61% of normal by the fourth quarter of this year and climb to 81% of normal by the end of 2016.

In another way of looking at the long road back to normal, by the end of 2016, the top 40% of states will be back to near normal production levels, compared to the bottom 20%, which will still be below 75%.

“What we are seeing, no matter what bucket you are in, the numbers are getting better,” said Denk. “There’s a broader recovery all around.”

Top 10 Reasons 2015 will Be a Growth Year for Housing

During his briefing to our membership last week, NAHB Chief Economist David Crowe cited his top 10 list that points to a more robust year for housing in 2015.  Below is Dr. Crowe's top 10 list for 2015:

• Economic growth has improved and was near 4% in the last half of 2014.
• Employment gains are more solid and consistent, averaging more than 250,000 per month in 2014.
• Consumer confidence is growing and back to pre-recession levels.
• Significant pent up demand is building: More than 7 million existing home sales have been postponed or lost since the housing downturn.
• Home owners’ equity is rising and up in the past three years.
• Household balance sheets are returning to normal.
• Household income is rising and up over the past three years.
• Mortgage availability is improving: administration and FHFA have taken steps.
• Mortgage rates are near historic lows: Some are below 4%.
• Inventory of available homes is increasing: New homes are up 45%, existing homes are up 16%.

The signs show that the housing recovery should move to higher ground in 2015.  Dr. Crowe expects single-family starts to increase 24% to 803,000, up from a preliminary 647,000 in 2014. Multifamily construction will level off at 365,000 up slightly from a preliminary 357,000 in 2014. Real remodeling expenditures will return to a positive year with an expected 3% rise in 2015.

Housing Market Forecast Luncheon with HBA, GGAR and NMBA planned for 2015 Featuring Dr. David Crowe, Chief Economist for NAHB

Want to start 2015 in the know and off right? Your HBA, SMC of the Upstate, Greater Greenville Association of Realtors (GGAR), and National Mortgage Bankers Association (NMBA) are working together to bring the best and most up to date economic information to you. Make plans to attend The Housing Market Forecast Luncheon at TD Convention Center on Tuesday, February 3rd, at 11:30 a.m. featuring Dr. David Crowe, Chief Economist for NAHB.

David Crowe is Chief Economist and Senior Vice President at the National Association of Home Builders (NAHB).   Dr. Crowe is responsible for NAHB’s forecast of housing and economic trends, survey research and analysis of the home building industry and consumer preferences as well as micro economic analysis of government policies that affect housing. 

Dr. Crowe is also responsible for the development and implementation of an innovative model of the local economic impact and fiscal cost of new home construction, which has estimated the net impact of new housing in over 500 local markets.  Past research has concentrated on home ownership trends, tax issues, demographics, government mortgage insurance, local land use ordinance impacts and the impacts of housing on local economies. 

Before becoming NAHB’s Chief Economist, Dr. Crowe was NAHB’s Senior Vice President for Regulatory and Housing Policy.  Prior to NAHB, Dr. Crowe was Deputy Director of the Division of Housing and Demographic Analysis at the U.S. Department of Housing and Urban Development. 

He has served on federal advisory committees to the Census Bureau and to the U.S. Department of Housing and Urban Development. 

Dr. Crowe holds a PhD in Economics from the University of Kentucky.

During this meeting the HBA will host a table top forum for HBA members and prospective members during registration and immediately following the meeting.  HBA members are invited to participate in the table top forum and there are 10 spaces available. If you are interested in sponsoring a TableTop contact the HBA office at 864-254-0133.

 * If you would like to attend the Housing Market Forecast Luncheon please RSVP by January 26th by calling the HBA Office at 864-254-0133.

Single-Family Production Poised to Take Off in 2015

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.

Mark Zandi, Chief Economist, Moody’s Analytics

• 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.

Robert Denk, NAHB Assistant Vice President for Forecast and Analysis

• 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%.

Dr. David Crowe Presents the Current State of the Housing Market

Dr. David Crowe

In a special edition of Housing Now, Dr. David Crowe discusses the current state of the housing market, and his current forecast for 2015.

Click here to watch Dr. Crowe's update.

Dr. Crowe is projecting the following for 2015:

• Remodeling: 3.2 percent increase over 2014, which will fall 2 percent over 2013.
• Multifamily: Up 3 percent in 2015 following a 14 percent jump in 2014.
• Single Family: Up 35 percent in 2015 following a 5 percent increase in 2014.

Crowe Comments that Single Family is still just a little more than half recovered in terms of a level he considers normal. However, he projects South Carolina to be in the top 20 percent of states at the end of 2015, and above historically normal levels.

National Data Indicates First Time Home Buyers are Still MIA

In the last year home building has surged 22 percent, and building permits are up 8 percent.  Even the Builder Confidence Index is up, now above 60.  However, first-time home buyers, which usually account for 30 percent of all new home buyers, is just 16 percent.

Why?  Underwriting guidelines, underemployment, high student loan debt, and a lower than expected opinion of homeownership, according to Dr. David Crowe, Chief Economist of the National Association of Home Builders.

Economic Outlook - January 2014

Economic Outlook is a monthly review of economic and housing statistics and housing policy issues. It is a digest of selected posts from Eye on Housing, a blog featuring news and analysis from NAHB Chief Economist David Crowe and Senior Economist Joshua J. Miller.

Recent economic and housing market data suggests the long-run recovery is back on track after a brief pause. Many indicators show improvements over the prior month data which was impacted by a partial government shut-down. Moving into 2014, consumers and builders expect conditions to improve while uncertainty persists in the labor market.

Although new home sales declined slightly from an unusually high October, housing starts bounced back in November. According to the Census Bureau and HUD, single-family starts rose to 727,000, the highest level since December 2007. Multifamily starts increased 26.8% over October. The Census Bureau’s latest release shows the number of homes under construction has now increased for 27 months in a row.

Pending home sales ticked up in November. According to the National Association of Realtors (NAR), the Pending Home Sales Index (PHSI) ticked up 0.2% in November. The month-over-month increase in the PSHI follows two months of decline.

Broader economic indicators also showed improvement. The Bureau of Economic Analysis (BEA) revised upward the annual seasonally adjusted real GDP growth rate to 4.1%, the highest reading in seven quarters. The unemployment rate declined to 7.0%, although the result was likely skewed by the misclassification of furloughed federal government workers in October.

Builders expressed confidence in buyers returning to the market after a drop in October and November. Builder confidence rose by four points in December to 58. An index above 50 indicates more builders see improvement than not.

Although builders remain optimistic, concerns persist as skilled labor remains in short supply. The number of construction sector job openings reached a five year high in October at 124,000. The inability of home builders to hire qualified labor remains a top concern.

The Federal Housing Finance Agency (FHFA) reported a decline in mortgage interest rates for both new and existing homes. According to the FHFA’s Monthly Interest Rate Survey (MIRS), the November data shows a 6 basis point decline in the average contract interest rate on loans to purchase newly-built homes.

The decline in mortgage interest rates may be short lived. The Federal Open Market Committee (FOMC) concluded the December meeting announcing it would begin winding down its asset purchase program. The decision to slow the asset purchase program should pass through to longer-term mortgage rates.

In analysis news, our economists examined the implications for builders of another tax proposal published by Senate Finance Committee. The most recent proposal proposes changes tax code rules concerning energy production and energy-efficient improvements. The proposal would replace most existing energy tax incentives with two credits favoring energy production at the expense of energy conservation and retrofitting.

Our economists also examined the impact of a decline in loan limits for mortgages back by the Federal Housing Administration (FHA). Stimulus legislation set to expire January 6, 2014 reduces the cap from $729,750 to $625,500 and the factor translating local home prices to an applicable limit from 125% to 115%. NAHB’s analysis indicates 408 counties will experience a loan limit decrease in excess of 10% if the legislation is allowed to expire. NAHB joined a number of other housing industry groups to extend the deadline.

Additionally, our economists examined the top reasons for moving in 2013. For the third straight year the number and share of movers doing so to own rather than rent a home increased. Between 2012 and 2013, approximately 2.1 million or 5.4% of all movers did so to own rather than rent. This represents an increase of 596,000 movers from the reading between 2010 and 2011. Overall, the new Census data shows household mobility decreased from the prior year. However, the reasons for moving are promising in that the most common reason for moving was to obtain new or better housing, followed by those wishing to establish their own household.

For the full story, check out these Eye on Housing posts.

With the Bump in Interest Rates Behind Us, Sales are Returning to Normal
The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts, ticked up 0.2% in November to 101.7 from a downwardly revised 101.5 in October. With the PHSI essentially flat at the end of the year, it is expected that existing home sales will remain roughly level at least during the first few months of 2014.Posted Dec. 30.

Rates on New Home Loans Join Downward Trend
On Christmas Eve, the Federal Housing Finance Agency (FHFA) reported a 6 basis point decline in the average contract interest rate on loans to purchase newly-built homes, from 4.32 to 4.26 percent. Posted Dec. 26.

Senate Finance Staff Discussion Draft: Energy Tax Incentives
The Senate Finance Committee released a draft proposal to change tax code’s rules concerning energy production and energy-efficient improvements. Under the draft proposal, most existing energy tax incentives would be eliminated or otherwise allowed to sunset and replaced by two credits favoring energy production. Posted Dec. 23.

Existing Sales Down
November existing home sales decreased 4.3% in November, and were down 1.2% from November 2012. All regions declined in November, ranging from an 8.5% decrease in the West to a 2.4% decrease in the South. Posted Dec. 19.

Homes Under Construction: A Good Sign of Recovery
The Census Bureau’s latest release shows that the seasonally adjusted number of homes under construction has now increased for 27 months in a row, going from 413,000 in August of 2011 to (a preliminary estimate of) 685,000 in November of 2013. The increases have come from both single-family and multifamily construction. Posted Dec. 18.

Home Building Passes the One Million Mark
November housing starts and permits reported by Census and HUD were over the one million mark in November. Single-family starts rose to 727,000, a 20.8% increase over October and the highest since December 2007. Multifamily starts rose to 364,000, a 26.8% increase over October. Posted Dec. 18.

Construction Sector Job Openings Reach 5-Year High in October
The number of unfilled construction sector positions (124,000) reached a five-year high, according to the October BLS Job Openings and Labor Turnover Survey. Posted Dec. 10.

David Crowe: Materials prices up 5 percent in 6 months

According to David Crowe, PhD., NAHB Chief Economist, material prices in a typical new home have increased five percent in the last six months. In addition, he says prices are up even more in the South and Southwest than the rest of the country.

Crowe reports that the increase in materials costs equates to an $8,500 increase in the cost of a new home. He said builders report increases in framing lumber, OSB, plywood, gypsum, trusses, ready-mix concrete, roofing materials, and cement.

Crowe said the information is the result of a survey of HBA members conducted by NAHB.

Read the complete report at builderonline.com by clicking here. Builderonline is the website for Builder, a magazine that each HBA member receives as a benefit of membership in the Home Builders Association.

Rising Costs Impacting Builder Confidence This Month

Facing increasing costs for building materials and rising concerns about the supply of developed lots and labor, builders registered less confidence in the market for newly built, single-family homes in April, with a two-point drop to 42 on the NAHB/Wells Fargo Housing Market Index (HMI), released last Monday.

Commenting on the latest data, NAHB Chief Economist David Crowe explained that “Supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues." However, he also noted that builders’ outlook for the next six months has improved "due to the low inventory of for-sale homes, rock bottom mortgage rates and rising consumer confidence."

While the HMI component gauging current sales conditions declined two points to 45 and the component gauging buyer traffic declined four points to 30 in April, the component gauging sales expectations in the next six months posted a three-point gain to 53 – its highest level since February of 2007.

Looking at three-month moving averages for regional HMI scores, the Northeast was unchanged at 38 in April while the Midwest registered a two-point decline to 45, the South registered a four-point decline to 42 and the West posted a three-point decline to 55. 

Multifamily Boosts Housing Starts Beyond Million Mark

Soaring production of multifamily apartments pushed nationwide housing starts beyond the million-unit mark for the first time since 2008 in March, according to government data released April 16.

While single-family production slipped 4.8% to a seasonally adjusted annual rate of 619,000 units, a 31.1% gain to 417,000 units on the multifamily side provided the boost needed to raise the overall production pace by 7% to 1.036 million units. Importantly, the decline on the single-family side was entirely due to a substantial upward revision to the previous month’s data, without which virtually no change would have been recorded this time around.

Meanwhile, the pace of multifamily production was the best seen since January of 2006. Three out of four regions posted gains in combined single- and multifamily housing production in March, with the Midwest registering a 9.6% increase, the South posting a 10.9% gain and the West noting a 2.7% rise. The Northeast was the lone exception to the rule, with a 5.8% decline. Meanwhile, permit issuance for all new housing units fell 3.9% to a 902,000-unit rate in March after recording a big gain in the previous month. That decline reflected a 0.5% reduction to 595,000 units on the single-family side and a 10% reduction to 307,000 units on the multifamily side.

In contrast to the regional starts report, the Northeast was the only part of the country to post a gain in permitting activity in March, with a 24.7% increase. The Midwest, South and West posted declines of 2.1%, 6.2% and 10.4%, respectively.

Calling the latest data a “mixed bag” due to the opposite direction of single- and multifamily starts and the somewhat weaker permit issuance, NAHB Chief Economist David Crowe said the numbers still indicate “a continuation of the slow, methodical march forward” that characterizes the housing recovery. He also noted that “The three-month moving average for single-family starts remained unchanged at 628,000 units in March – which is right on pace with NAHB’s forecast for a 25% gain in new-home production in 2013.”

Growing Labor Shortages Impeding Housing and Economic Recovery

Growing labor shortages in all facets of the residential construction sector are impeding the housing and economic recovery, according to a new survey conducted by the National Association of Home Builders (NAHB).

“The survey of our members shows that since June of 2012, residential construction firms are reporting an increasing number of shortages in all aspects of the industry – from carpenters, excavators, framers, roofers and plumbers, to bricklayers, HVAC, building maintenance managers and weatherization workers. The same holds true for subcontractors,” said NAHB Chief Economist David Crowe.

The survey also found that more than half of the builders reported that labor shortages over the past six months have caused them to pay higher wages or subcontractor bids to secure projects, and consequently, to raise home prices. Moreover, 46 percent of the builders surveyed experienced delays in completing projects on time, 15 percent had to turn down some projects and 9 percent lost or cancelled sales as a result of recent labor shortages.

Part of the reason for the labor shortages can be attributed to the fact that many skilled residential construction workers were forced to seek employment elsewhere during the recession and are no longer currently available.

“What used to be high-paying, skilled jobs vanished as builders across the nation went out of business or were forced to let workers go,” said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C.

The loss of tens of thousands of housing jobs mushroomed to more than 1.4 million during the peak of the downturn. During this period, many trades retrained construction workers and they are not returning to the residential construction sector.

Meanwhile, a lack of buildable lots and increased costs for materials and labor are also contributing to the problem, as the infrastructure that supports home building moves to re-establish itself following the worst housing downturn since the Great Depression, Crowe said.

To help meet the growing demand for skilled labor within the housing sector, the Home Builders Institute (HBI), in partnership with NAHB, provides career training and job placement in the building industry. HBI offers an array of portable pre-apprenticeship training programs in a variety of skilled trades that can be customized to meet the workforce needs of communities across the nation. HBI regularly places approximately 80 percent of its student graduates in jobs in the building sector.

“We are ramping up our efforts to train diverse populations and place them in jobs to meet the growing demand of the building sector,” said HBI President and CEO John Courson.

“Even in a period of relatively high unemployment, we still need to complement our job training efforts by bringing in foreign workers to meet the needs of home builders and home buyers,” added Judson.

The worker shortages are not only slowing the housing recovery, but also hurting job and economic growth.

Nationally, the construction of 1,000 single-family homes generates more than 3,000 jobs, approximately $145.4 million in wages, and more than $89 million in federal, state and local tax revenues. That doesn’t even count the increase in annual property taxes that local municipalities rely on to fund schools, police and firefighters.

As the economy mends, pent-up demand for housing will continue to grow, as roughly 2 million household formations were delayed as a result of the Great Recession. In normal economic times, demand for new homes should be about 1.7 million annually.
NAHB is anticipating total housing starts of 970,000 this year and 1.18 million in 2014 as the market continues its gradual rebound.

“We need to look holistically at the home building infrastructure to meet growing and future demand,” said Judson. “To avoid a run-up in prices in hot markets due to labor issues, we need to complement our current training programs with a market-based visa system that would allow more immigrants to legally enter the construction workforce each year when there is a dearth of workers to fill the jobs that are needed.”

Dr. David Crowe Predicts More Housing Growth in 2013

Dr. David Crowe, Chief Economist of the National Association of Home Builders, predicted continued growth in new home construction in 2013 at the sixth annual Upstate Housing Market Forecast Luncheon.  The buzz was clearly in the room: housing is on the rebound.

All segments of the home building industry should continue to grow in 2013, according to the NAHB Economics housing and economic forecast. Single-family and multifamily construction will see strong growth rates, with remodeling experiencing lesser but still positive growth. Driven by demographic factors, the 55+ sector should witness growth comparable to that of single-family and multifamily building.

Growth in the housing industry remains critical for the economy as a whole, as the preliminary fourth-quarter GDP report from the Bureau of Economic Analysis demonstrates. Due to declines in government spending and business inventories, the initial estimate for economic growth for the last three months of 2012 turned down at -0.1%. However, home building (residential fixed investment or RFI) was a net contributor on the growth side of the equation for the seventh consecutive quarter.

For the final quarter of 2012, RFI added 0.36 percentage points to GDP, the second-highest tally since the end of the Great Recession. Put another way, had home building been flat for the quarter, the initial estimate for fourth-quarter GDP would have been strongly negative at 0.46%.

And NAHB expects this growth for home building to continue. For the single-family market, there were 535,500 housing starts in 2012, a 24% increase over 2011. The current rate of single-family construction is now up 74% from the market low point of March 2009 but represents only 44% of “normal” conditions (levels of activity comparable to the period of 2000 through 2003). For 2013, we forecast that single-family starts will total 650,000, a growth rate of 22%. And we expect that growth to accelerate into 2014, when single-family construction will grow another 30%.

Multifamily construction will continue expanding into 2013. This rebound has come more easily than other parts of the housing industry due in part to the strong demand for rental properties. After 56% growth off market lows in 2010, multifamily starts totaled 244,500 in 2012, a growth rate of 37%. NAHB expects this trend to continue, with slowing but still positive growth in future years. For 2013, we forecast a multifamily starts total of 299,000, a 22% increase over the prior year. And in 2014, we expect a smaller 6% growth rate to reach a starts total of 317,000.

Remodeling should also benefit from generally improving housing conditions. Total remodeling activity was up 4.5% from 2011 to 2012, despite the temporary sunset of a commonly claimed energy-efficiency tax credit for existing homes. For 2013, NAHB forecasts additional 2.4% growth, with 1.7% for 2014.

Focusing on the growing 55+ housing market reveals trends similar to that of the overall home building industry. NAHB estimates that total starts allocable to 55+ communities will increase 21.9% to 74,000 in 2013 19.9% to 89,000 in 2014. Demographics are driving this growth: The share of U.S. households aged 55 and over will increase from 42% in 2012 to 46.6% in 2020. Single-family 55+ starts will be up 23% in 2013 to a total of 37,500, while construction of multifamily 55+ housing units will increase 20.8% to a starts total of about 37,000.

The across-the-board growth forecast for the housing sector should result in job gains in 2013. NAHB estimates that on average every, single-family home built creategenerates enough work to create three jobs. Correspondingly, every multifamily unit constructed and every $100,000 in remodeling expenditures each generate one job.

The positive forecast for 2013 and 2014 builds on the gains for housing in 2012. However, there was some slowing of elements of housing at the end of the year. The Pending Home Sales Index, produced by the National Association of Realtors, fell in December but remains strongly higher year over year. Similarly, existing home sales declined a little for the last month of 2012, but the current sales pace is up 13% compared to December 2011. Inventories of existing homes continued their decline.

According to the Census Bureau, the seasonally adjusted homeownership rate remained unchanged at 65.3% during the final three months of 2012. For the year as a whole, the homeownership rate averaged approximately 65.5% – the weakest calendar year average since 1996. Homeownership rates declined across all age groups compared to the fourth quarter of 2011; however, the largest year-over-year decline occurred among households headed by a person between 35 and 44 years old.

The declining homeownership rate for these younger households certainly helped to boost multifamily production for the year. For December, the annual rate of starts in buildings with five or more apartments increased 23%. The five-plus current starts rate is now up 115% year over year.

But the overall improving conditions for housing are reflected in the current Federal Reserve Beige Book. According to the report, real estate activity continues to grow, with all Fed districts except one reporting that residential construction expanding. The exception – the Kansas City District – noted that “increased lumber and drywall costs limited construction.”

Lending activity continues to improve, albeit at a moderate pace. The Beige Book indicated that tightness in mortgage lending may be showing signs of recovery in certain regions of the country. Overall, loan demand was higher or held steady in nine of the ten districts. Credit standards remained “largely unchanged,” though two districts, Atlanta and Chicago, reported that standards may have “loosened some.” In the Atlanta District, aggressive competition for highly qualified borrowers was leading a growing willingness on the part of banks to increase their risk tolerance and loosen credit standards.

Housing Remains on Growth Track for 2013; Find Out More at the Annual Upstate Housing Market Forecast

Upward trends in recent months among a number of housing indicators point to a slow and steady growth in the nation’s housing market in 2013, but several challenges remain, according to the latest economic and housing forecast by David Crowe, chief economist for the National Association of Home Builders (NAHB).

“Consistent, positive reports on housing starts, permits, prices, new-home sales and builder confidence in recent months provide further confirmation that a gradual but steady housing recovery is underway across much of the nation,” said Crowe. “However, stubbornly tight lending standards for home buyers and builders, inaccurate appraisals and proposals by policymakers to tamper with the mortgage interest deduction could dampen future housing demand.”

Upstate Housing Market Forecast is the Place to get the Latest Information about the Local Housing Economy
NAHB Chief Economist David Crowe and Dale Aiken of the Market Edge are featured speakers at the Upstate Housing Market Forecast on January 30.  Make plans now to attend and plan your business strategy using the latest economic data for 2013.  Click here to register. 

Stating there is no consistent national trend, Crowe noted the housing recovery is local but spreading.

“We are transitioning from a very low demand level, where most people hold themselves out of the marketplace, to a case where supply will start being the problem,” he said. “As we begin to build more homes to address that supply, the new home stock will be a much more important element of the recovery.”


Setting the 2000-2002 period as a baseline benchmark for normal housing activity, Crowe said that owner-occupied remodeling has returned to previously normal levels.

“Multifamily production is also well on its way, back to 69 percent of normal,” he said. “It’s the single-family market that has the farthest to go, standing at only 40 percent of what is considered a typical market.”

Meanwhile, the number of improving housing markets across the nation continues to show considerable advancement. When the NAHB/First American Improving Markets Index (IMI) was launched in September of 2011, only 12 metropolitan areas out of 360 were on the list. As of December 2012, the list stands at more than 200 metro areas. The index is based on a six-month upswing in housing permits, employment and house prices.

“One reason we have seen such a significant jump in the IMI is because house prices are beginning to recover,” said Crowe. “House prices bottomed out early in 2011 and since early 2012 we’ve seen a 6 percent increase on a national basis.”

Another factor spurring the recovery is that household formations are on the rise. In the early part of the decade, the nation was generating 1.4 million new households each year. This collapsed to 500,000 annually during the housing downturn and currently new households are being formed at close to a 900,000 clip per annum.

“We’re not up to normal, but this is adding to demand for housing,” Crowe said.

As new households form at a growing rate, so too does builder confidence. The NAHB/Wells Fargo Housing Market Index, which measures builder confidence in the single-family housing market, has posted gains for eight consecutive months and now stands at a level of 47. This is very close to the critical midpoint of 50, where equal numbers of builders view the market as good or bad. The HMI has not been above 50 since April of 2006.

Single-family home starts are projected to climb to 534,000 units this year, up 23 percent from 2011. NAHB is forecasting that single-family new-home production will post a healthy 21 percent gain in 2013 to 647,000 units. Starts will continue their upward climb in 2014, posting a further 29 percent rise to 837,000 units.

Multifamily production is expected to rise 31 percent in 2012, reaching the 233,000 level, and posting a solid 16 percent gain in 2013 to 270,000 units. Multifamily starts are anticipated to rise an additional 9 percent in 2014 to 294,000 units.

Meanwhile, new single-family home sales are expected to rise from 307,000 last year to 367,000 this year, a 20 percent rise. Sales are anticipated to climb to 447,000 next year, up 22 percent from 2012 and jump to 607,000 in 2014, a 36 percent increase over 2013 levels.