Homebuilders across the country are responding to renewed buyer demand that, in 2014, is expected to fuel the most housing starts in almost seven years.
But nationwide home construction is still far below where it was before the recession, the industry’s top economists say.
“We have a very low inventory of existing homes on the market,” said David Crowe, chief economist with the National Association of Home Builders. “We have a strong need for homebuilding.”
Crowe is forecasting that single-family home starts in the U.S. could rise more than 30 percent in 2014. He spoke this week at the industry’s annual International Builders’ Show in Las Vegas.
“My single-family forecast for 2014 is pretty aggressive – it’s 822,000 starts,” Crowe said, “which is roughly 200,000 starts more than what we will likely end up with in 2013.”
Estimates are that U.S. builders started 621,000 houses last year – a rise of 16 percent from 2012 construction. But housing starts remain at less than half of where they were in 2006.
Crowe said homebuyers are coming back to the market in most cities.
“The consumer is much more on board now,” he said. “Attitudes, not just about the overall economy but housing in particular, have improved.”
In markets across the nation, homebuilders have a lot of ground to make up.
Only about 8 percent of annual home sales are new properties, Crowe said.
“The new home component is half of what it normally is,” he said.
Builders say shortages of construction sites, labor and materials are making it difficult for them to respond to resurging demand.
Annual housing moves are still restrained.
“Existing homeowners are reluctant to roll over” into another house, Crowe said.
Economists say they are still waiting for the big surge in household formation and the home buying that typically follows a recession.
“From the beginning of the Great Recession and on, we have created households at a much slower rate than we have historically,” said David Berson, chief economist with Nationwide Insurance.
“We probably have at least 3 million fewer households that have been formed over the last five or six years than we should have,” Berson said.
He predicts that household formation will increase this year, bringing more home purchases, as long as the job markets hold up.
“If we get stronger job growth this year, we should see a pickup in household formations, and that will add to housing demand,” Berson said. “We were hoping it would have occurred already.”
Those who decide to make a purchase in 2014 will pay more to finance their properties, but home loan interest rates remain low by historic measures.
“Mortgage rates for 30-year fixed loans are averaging about 4 (percent) right now,” said Frank Nothaft, chief economist at mortgage giant Freddie Mac. “I know it’s up from a year ago, but a year ago mortgage rates were dirt cheap.”
Nothaft is forecasting a gradual increase in home financing costs this year, to near 5 percent.
“Most housing markets across the U.S. will remain generally affordable,” he said, and overall home sales should rise about 5 percent.
“We expect national price indices for housing to continue to rise in 2014 – not at the same pace,” Nothaft said. “We are expecting about a 5 percent rise.”
Nationwide home prices rose about 11 percent in 2013.