Housing recovery should improve steadily in 2016
A convergence of trends will provide a steady boost to the housing market in 2016, according to economists who participated in the National Association of Home Builders’ fall construction forecast.
Steady employment and economic growth, pent-up demand, affordable home prices and attractive mortgage are the tailwinds that will propel the market, according to a release. A shortage of lots and workers along with rising material costs will prevent a more robust recovery.
“This recovery is all about jobs,” said NAHB Chief Economist David Crowe. “If people can get good jobs that pay decent incomes, the housing market will continue to move forward.”
The good news, Crowe said, is that total U.S. employment of 142 million is now well above the previous peak of 138 million that occurred in 2008.
Home equity has nearly doubled since 2011 and now stands at $12.5 trillion.
Although mortgage interest rates are expected to rise over the near term, averaging 4.5 percent in 2016 and 5.5 percent in 2017, Crowe said this is not expected to have an impact on the housing recovery.
The NAHB is projecting 719,000 single-family starts in 2015, up 11 percent from the 647,000 units produced last year. Single-family production is projected to increase an additional 27 percent in 2016 to 914,000 units.
On the multifamily side, production ran at 354,000 units last year, slightly above the 331,000 level that is considered a normal level of production. Multifamily starts are expected to rise 9 percent to 387,000 units this year and post a modest 3 percent decline to 378,000 units in 2016.
Residential remodeling activity is forecast to increase 6.8 percent in 2015 over last year and rise an additional 6.1 percent in 2016.
The report also found that millennials prefer to own a home in the suburbs rather than rent an apartment in a city.
However, an overwhelming majority of millennials, who are still starting households and paying off college debt, say it will be at least two years before they are ready to buy.