A Positive Outlook for the Housing Market
As the economy continues to grow, NAHB is projecting 1.16 million total housing starts in 2016, up 4.9% from the previous year. Single-family production is expected to increase by 10% or 855,000 units in 2017, and an additional 12% or 961,000 in the following year.
The NAHB anticipates multifamily production to hold steady in 2017 at 384,000 units, which is slightly above last year. Residential remodeling activity is also projected to increase by 1% gain over last year.
Supply and Demand
David Berson, chief economist for Nationwide Mutual Insurance Co., expects mortgage rates to rise in the coming year, but indicates that it should not have a negative effect on housing demand. “Higher mortgage rates will be offset by stronger wage gains and job growth, which suggests that housing demand will increase this year,” he says. “The question is, how much will supply go up?”
However, one major concern of 2017 is that demand will exceed supply, putting more pressure on home prices.
With demographics positive for housing and home sales going forward, millennials have become a big potential base to expand the home buyer market. NAHB Chief Economist Robert Dietz says townhome construction, a useful transition for millennials in homeownership, is showing growth and now composes 12% of all single-family starts. “The industry needs to recruit more workers and get more land in the pipeline, but it will take time,” he says.
More than 60% of builders nationwide are reporting low or very-low supplies, and the rate of unfilled jobs is higher than the building boom. While the construction sector is on the rise, it needs to grow faster in order to meet demand.
Builders must look to prepare for the potential of these growth opportunities. With the emergence of the millennial group in the homebuying marketing, the increase in employment gains, and a growing economy, the construction sector may need to climb even faster to meet the projections.