February 5, 2013
LAS VEGAS — The housing market is continuing its steady climb back and experts are predicting another year of continued growth and a long-awaited increase in demand.
Last month, the U.S. Census Bureau announced that an estimated 780,000 housing units were started in 2012, a 28 percent jump from 2011. And permits were authorized for 813,400 housing units last year — a 30 percent increase from 2011 — meaning more construction is on the way.
That growth is partly thanks to a big boost in multifamily housing. Multifamily production has risen 273 percent since its low point in 2009, according to the National Association of Home Builders.
During the recession, the number of people forming households dropped. In the last couple years, that number has picked up, but those new households tend to be young people who rent, said David Crowe, chief economist for Washington-based NAHB.
Crowe spoke on a panel of housing experts at NAHB's International Builders Show, held Jan. 22-24 in Las Vegas.
NAHB is predicting 949,000 total housing starts in 2013, a 21.5 percent increase, as multifamily construction tapers off and reaches normal levels.
The single-family market, still running at well below normal, will take over as a strong component of housing by the start of 2014, Crowe said.
Housing prices are starting to increase nationwide — up 6 percent on an annualized rate over the last 10 months — and that has led to more demand for single-family housing, he said. "People finally feel comfortable that if they buy a house, it will continue to appreciate instead of depreciate."
If everything goes well, housing demand, both for owner-occupied and rental, will pick up significantly in the next three to five years, said David Berson, senior vice president and chief economist for Nationwide Mutual Insurance Co.
Berson was more optimistic about housing starts in 2013; he predicted 980,000 total housing starts this year, the strongest numbers since 2007.
It's unlikely, but 2013 could be the year that housing starts reach 1 million, especially if multifamily construction stays strong, he added.
Frank Nothaft, chief economist at Freddie Mac, predicted 930,000 housing starts in 2013.
There are several headwinds pushing back on housing demand, including elevated unemployment and low levels of consumer confidence, even though the U.S. has the most affordable housing market in decades, Nothaft said.
Uncertainty about the debt ceiling and the possibility of government sequester could also limit growth, Berson said, as well as public policy changes and a too-tight credit environment.
The construction industry can support modest housing growth, 21-22 percent in 2013, but "if we expanded any faster, we'd have difficulty rearranging the resources that we need to build houses," Crowe said.
When the housing market collapsed, construction resources went elsewhere — construction workers found different jobs, plants that produce building materials shut down, and lots stopped being developed. Getting those resources back can't happen overnight, he said.
The industry needs to attract labor by raising wages and ensuring that "if you come back into housing and construction, you'll have a job that stays a job."
They also need to prove to manufacturers that opening new plants and producing more building materials is a worthwhile and sustainable investment, he said.
Builders rank material prices as their biggest concerns in 2012 and going into 2013, he added.
Remodelers are also looking at another year of steady growth.
NAHB predicts a 2.4 percent increase in spending on residential remodeling in owner-occupied, single-family homes in 2013, and 1.7 percent in 2014.
NAHB's Remodeling Market Index, based on a quarterly survey of professional remodelers, reached 55 in the fourth quarter of 2012. That's a five-point increase from the third quarter of 2012 and the highest rating since the first quarter of 2004, according to the association. An RMI of more than 50 indicates that more remodelers than not report a rise in market activity.