Washington – Sparked by rising home prices across much of the nation, the housing recovery is now under way. However, fiscal uncertainties and other challenges could result in a bumpy ride in the coming months, according to economists who participated in the National Association of Home Builders (NAHB) webinar on the construction and economic outlook, held on October 17.
“We’re seeing a more robust housing sector than many other parts of the economy,” said NAHB chief economist David Crowe. “One of the reasons is we have finally begun to see on a national scale that house prices are picking up again.”
Crowe cited a number of other factors that are carrying the housing momentum forward, including:
· Pent-up household formations
· Rising consumer confidence
· Increasing builder confidence in all three legs of the industry: remodeling, multifamily and single-family construction
· Growing rental demand
· More than 100 metros currently on the NAHB/First American Improving Markets Index
However, Crowe offered several cautionary factors that continue to put a drag on housing activity at this time – including builders who are experiencing difficulties in obtaining production credit, qualified buyers who are unable to obtain mortgage loans, inaccurate appraisals, delinquent mortgages that are at least 90 days late or in foreclosure, and a limited inventory of developed lots in certain markets.
Other causes contributing to uncertainty in the marketplace include the looming “fiscal cliff” that will trigger mandatory budget cuts and tax increases at the beginning of next year, pending Dodd-Frank Act regulations that are making financial institutions hesitant to lend since they don’t know how the new rules will affect them, tax reform, and the future role of Fannie Mae and Freddie Mac in the nation’s housing finance system.
NAHB is forecasting a 21 percent increase in single-family starts this year to 528,000 units and a further 26 percent climb to 665,000 units in 2013. Multifamily housing starts are expected to rise 26 percent this year to 224,000 units and 6 percent in 2013 to 238,000 units.
According to Robert Denk, NAHB’s assistant vice president for forecasting and analysis, housing starts on a natitonal basis are projected to get back to 55 percent of normal production by the end of next year and 70 percent of normal by the end of 2014.