Sources: National Association of Home Builders, Washington, D.C.; CP staff
Job growth, rising consumer confidence, higher household formations and pent-up demand are helping to bring prospective home buyers back into the market. “A number of positive indicators provide solid evidence this will be a good year for housing and the economy,” affirmed NAHB Chief Economist David Crowe in Las Vegas, site of the 2016 International Builders’ Show.
Private sector job growth has been averaging 240,000 per month over the past two years. Gross domestic product growth is expected to climb slightly above last year’s level and consumer confidence is nearly back to its pre-recession peak, he 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.
NAHB is forecasting 1.26 million total housing starts in 2016, up 13.4 percent 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. Crowe contrasted the present figures against the healthy benchmark of the 2000–2003 period, when single family starts averaged 1.34 million units on an annual basis. The ongoing housing recovery will see single-family starts steadily climb from 55 percent of normal production at the end of the third quarter of 2015 to 87 percent of normal by the end of 2017. On the multifamily side, NAHB is anticipating 417,000 starts in 2016, up 5 percent from an expected total of 397,000 units last year.
Delving below the national numbers, Nationwide Insurance Chief Economist David Berson notes that most regional housing markets look healthy. Labor market conditions, a key driver of housing demand, are strong in many metropolitan statistical areas (MSA)—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.
With the unemployment rate declining in 90 percent of the MSAs over the past year, he added, the housing fundamentals are the strongest in over a decade, a trend supported by the labor market, demographics and consumer preference to own. However, 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 reduce employment.