More single-family homes will be constructed in 2017, but at a gradual rate, reported economists at the recent National Association of Home Builders (NAHB) International Builders’ Show. The NAHB expects single-family construction to rise 10 percent to 855,000 units, and to 12 percent to 961,000 in 2018.
Sixty-four percent of home builders, according to NAHB Chief Economist Robert Dietz, are seeing “low” or “very low” lot supplies.
“While positive developments on the demand side will support solid growth in the single-family housing sector in 2017, builders in many markets continue to face supply-side constraints led by the three Ls—lots, labor and lending,” said Dietz at the show. “The industry needs to recruit more workers and get more land in the pipeline, but it will take time.”
Confidence and growth in the economy could give home-building a boost, with home builders optimistic that the new administration will lower construction costs. Said Dietz, “Regulatory requirements make up nearly 25 percent of the cost of a new home. Given those constraints, it is hard to build a $200,000 entry-level house.”
Townhouse construction, Dietz said, is growing and viable, especially for first-time homebuyers, comprising 12 percent of starts.
On the topic of homeownership, economists at the show expected mortgage rates to average 4.5 percent in the year ahead, and 5.3 percent in 2018.
“We anticipate a stronger economy will translate into higher mortgage rates,” said CoreLogic Chief Economist Dr. Frank Nothaft. “Meanwhile, we expect moderation in 2017 for rent and home price growth, but it will still be higher than inflation, reflecting the tight inventory in the housing market.
“Mortgage rates are up three-quarters of a point since last summer and house prices are up,” Nothaft said. “That starts to pinch a household budget.”