Housing Recovery Picking Up Steam, Say Economists
With home prices and household formations rising and household balance sheets healing, the ongoing housing recovery is expected to gain momentum next year even as several challenges remain, according to economists who participated in NAHB's Construction Forecast Webinar on Oct. 2. spacer
“The cards are in play for a decent and fairly strong recovery in 2014 and particularly in 2015,” said NAHB Chief Economist David Crowe. “From the standpoint of GDP growth, housing has been a plus, growing at two, three and four times the rate of the rest of the economy in recent quarters.” Helping to spur the housing rebound was a double-digit increase in home prices over the past year, driven in part by tight inventories of new and existing homes for sale and gradual gains in employment. “We expect to see price increases moderate in the next few years as we see additional inventory on the market and investors back away as the bargains disappear,” said David.
Another bright spot is rising household formations that were delayed during the downturn as college graduates and young professionals were forced to move back in with their parents or double up as roommates. At the height of the housing boom, the U.S. was producing 1.4 million additional households every year. That figure plunged to 500,000 during the depth of the recession and today is now back up to 700,000. On the flip side of the coin, Dr. Crowe also cited several headwinds that are impeding the recovery, including tight credit conditions, increasing labor shortages, shrinking lot supplies, rising costs for building materials and inaccurate home appraisals.
NAHB is forecasting 924,000 total housing starts in 2013, up 18% from 783,000 units last year. Single-family production is expected to rise 17% this year to 629,000 units, jump an additional 31% next year to 826,000 and surpass the 1 million mark in 2015. On the multifamily side, NAHB projects starts will increase 20% in 2013 to 296,000 units and rise an additional 10% to 326,000 units next year, which is back to what could be considered a "normal" level of production. Meanwhile, residential remodeling has already returned to previously normal levels of the early 2000s and remodeling activity is expected to register a modest gain this year over 2012.
What the Government Shutdown Means for NAHB Members
NAHB Chairman Rick Judson sent out a detailed message to all members on Oct. 1 explaining some of the ways that the federal government shutdown could impact home builders and their associates going forward. While in most cases the short-run impacts will be minor, a long-run shutdown -- lasting several weeks or a month or more -- could have significant impacts on mortgage accessibility and reduce housing demand. And over the coming weeks, the shutdown could merge with the issue of raising the debt ceiling, which could have very significant impacts on interest rates, as well as monetary and fiscal policy. Here is a quick rundown of need-to-know information regarding the status of key government housing programs during the shutdown: HUD
- FHA-insured single-family loans will continue to be endorsed in the near term, although some delays in processing and closing should be expected.
- FHA multifamily insured projects with firm commitments and scheduled closings may go forward, although no new firm commitments will be issued.
- Section 8 Project Based Rental Assistance Contracts, rent supplement, Section 236, and PRACs with permanent or indefinite authority or multi-year funding will have payments made from budget authority available from prior appropriations or recaptures.
- No Real Estate Assessment Center (REAC) inspections can take place.
- CDBG, HOME and other block grant funds will be dispersed in cases where failure to address issues result in a threat to safety of life and protection of property.
- Authorized drawdowns for approved CPD program activities (homeless assistance programs, CDBG, HOME, HOPWA) using pre-FY2014 program funds will continue uninterrupted unless it is necessary for a HUD employee to approve a voucher or lift a system edit prior to a draw down.
- Most Rural Development programs will not operate while the shutdown continues.
- The Section 521 Rental Assistance, Section 542 Rural Housing Vouchers, and Single Family Section 502 Guaranteed Loans will continue until funding is exhausted.
- A shutdown of more than two weeks is likely to have a significant impact on rural development programs.
- E-Verify, the Internet-based system that allows businesses to determine the eligibility of their employees to work in the U.S., is unavailable due to the government shutdown. While E-Verify is unavailable, employers will not be able to access their E-Verify accounts. Details on how this could impact your company’s operations can be found here.
- The SBA will not initiate new loan guarantees during the shutdown.
- With the exception of “imminent danger” to life or property and other emergency situations, OSHA’s investigation and enforcement activities will cease during the shutdown.
- Businesses who seek permits from the Fish and Wildlife Service could be affected. New permits or applications currently under review will not be processed during the government shutdown, which will increase costs and delays.
- Businesses that file the Clean Water Act National Pollutant Discharge Elimination System permit in states where EPA is the primary permitting authority may notice a delay in issuance of their stormwater permits. These states are Idaho, Massachusetts, New Hampshire and New Mexico, along with the District of Columbia.
- The Energy Star program is shut down until further notice and the processing of all partner applications and partner inquiries has been put on hold. Updates to Energy Star qualified product lists and release of draft Energy Star specifications will also be delayed.
- Some lenders require home borrowers to file IRS form 4506-T to verify the mortgage applicant’s income and Social Security number. With the IRS shut down, this could result in major delays in some mortgage application approvals.
- Due to the shutdown, the August Census construction spending report was not published. The important monthly jobs report for September from BLS is unlikely to be published. And future reports on items like housing starts and new home sales could also be postponed.
In general, NAHB members should expect delays for any housing-related federal government programs that are still operating and plan accordingly. Rest assured that your national association continues to closely monitor the situation and will keep you posted on any new developments.
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- Joanne Loftus