According to the experts, housing is on the up-and-up.

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 in 2016, according to economists at the recent International Builders’ Show.

“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.

One of those is private-sector job growth, which 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.

Production Will Grow

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. 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 percent of normal production at the end of the third quarter of 2015 all the way up 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.

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

A Mostly Bright Regional Outlook

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.

Mortgages, Pricing and Geographic Growth

Frank Nothaft, chief economist of CoreLogic, foresees solid fundamentals for housing in 2016.

With 30-year fixed-rate mortgages running at or below 4 percent 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 percent, 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 percent 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.

Millennials to Shape Preferences

Beyond housing demand comes housing design. According to NAHB and Better Homes and Gardens speakers, millennials are poised to make a significant impact on home design with their strong preferences.

But first, they have to move out of their parents’ homes and into a place of their own, said NAHB assistant vice president for survey research rose quint. In 2015, about 15 percent of adults ages 25-34 lived with a parent, about 3 percent more than the highest share between 1983 and 2007, which was 12 percent. That translates into 1.3 million people who normally “would be out there, forming their own households, demanding their own units,” either as buyers or renters, she said.

Quint had anticipated that new mortgage programs and looser mortgage insurance requirements unveiled a year ago would have led to an increase in consumers buying homes for the first time. But a look at the size of the typical new single-family home in 2015 found the opposite: home sizes grew to an average of 2,721 square feet, the highest yet, and an indication that the new-home market continues to be dominated by move-up buyers, rather than first-time buyers.

“Before we see that expected pullback in square footage and price, we’re going to have to see a significant return of the first-time buyer,” who is more likely to buy a smaller home at a lower price point, Quint said.

This year, home buyers of all ages say they are looking for homes with separate laundry rooms, energy-star windows and a patio.

In terms of house type, buyers want a detached, single-family home: 65 percent of all buyers and 68 percent of millennials expressed that preference. That number rises to 72 percent with Gen X (born between 1965 and 1979) but falls somewhat to 55 percent with those born before 1945, Quint said.

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