NAHB Forecasts Strong Growth For 2013April 26th, 2013 by DWM Magazine
In a construction forecast webinar held Wednesday by the National Association of Home Builders (NAHB), chief economist David Crowe said housing numbers will continue to recover.
As gross domestic product continues improve, the true force behind it is housing.
“What is important about the growth this time around it is its finally being driven by housing … we are seeing housing moving at three or four times the rate of the rest of the economy and boosting the economy,” said Crowe.
Demand is another segment Crowe said will see healthy numbers.
“We’re in for very strong demand,” he said. “We’re entering a period when we have a larger number of people forming households … We have a large number of people moving into a critical age group of forming homes, however, we have had a critical pause … What is interesting is that the demand that has come forward is all renters.”
“Household formation is finally recovering … there’s a lot of pent-up demand for living space,” said Maury Harris, managing director and chief economist for Americas UBS. “The adult population represents the potential household formation and it is growing at about 1 percent a year. We went for a long period where the number of actual household formations were growing much slower than the overall adult population. As a result you had a large buildup of pent-up demand for housing.”
“We’ve also seen a return of migration within the country,” said Crowe, noting that Texas, North Dakota and Alaska were among the states seeing the highest levels of migration.
“During much of 2011 we weren’t clear what was going to happen, there was a lot of doubt … that changed in early 2012 and we’ve seen pretty steady and relatively strong increases in house prices since then,” added Crowe.
“An important part of the real estate picture is the price of housing,” said Harrs. “Non-distressed house prices are rising and median asking prices for vacant units are stabilizing.”
“Beginning in 2012 what we’re seeing is a steady increase in house prices. All of the indicators are telling us basically the same story,” added Robert Denk, assistant vice president for forecasting and analysis, NAHB.
The number of metropolitan areas that have seen house prices rise is another indicator seeing substantial, continuous growth, now up to about 273 improving metro areas out of 361 total markets.
Despite the overall positive projection over the next year, Crowe and Denk caution that there will still be areas for concern.
“Foreclosures will be a challenge in getting the market back on track across the country,” said Denk. “The industrial Midwest is having the toughest time getting going.”
Additionally, Crowe said appraisals remain a problem, with one-third reporting lost sales and slightly fewer reporting below cost of production. There is also some or severe labor shortages, with framing crews and rough carpenters having the highest number of shortages. Because of the shortages, more than half of builders say they are paying higher wages and subcontractor bids.
Other threats include tax reform, financial regulation, credit availability, immigration reform and debt/deficit reduction.
Denk said recovery will vary by state but the national average will be 53 percent of normal by 2013Q4 and 71 percent of normal by 2014Q4.
Casey Neeley is the assistant editor of DWM magazine. She can be reached at firstname.lastname@example.org.