Orlando, Fla. — The forecast for home construction points to a 10 percent growth rate for single-family houses at about 855,000 starts this year followed by another push of 12 percent to about 961,000 starts in 2018.
“We don’t get to 1 million in single-family starts over the forecast window,” Robert Dietz, chief economist for the National Association of Home Builders said during the trade group’s annual forecast, which was released at its annual major event, the International Builders’ Show.
The industry needs to reach that million-start milestone and then some, Dietz added, pegging baseline demand for single-family starts at about 1.3 million units, which reflects the “normal housing activity seen from 2000-2003.
“That’s what we need for population growth, and the 300,000 to 400,000 homes that we lose from the housing stock each year,” Dietz said of the nation’s aging houses, which get demolished, and the outdated houses that become knock downs for their valued lots, which are in short supply.
“So by the end of the fourth quarter 2018, we’re still only at 75 percent of that [1.3 million] level. So the recovery in home building essentially continues, and will continue into 2019 and 2020,” Dietz said.
That’s good news for manufacturers of plastic building materials like polyolefin house wraps, polyurethane foam sprays, vinyl siding, vinyl windows, composite wood decks, polypropylene roof tiles and chlorinated PVC pipes for residential fire sprinklers.
Dietz said one trend to note involves home size, which rose coming out of the Great Recession to about 2,500 square feet but has been dipping in recent quarters to about 2,400 square feet.
“The reason it’s fallen is that builders are offering an additional entry level product and it’s changing the distribution of homes in the mix,” Dietz said.
A growing economy, employment gains and rising household formations have all contributed to the gradual, upward trajectory of the housing market while what Dietz calls the three Ls — lots, labor and lending — pose supply-side constraints.
The number of unfilled construction jobs now exceeds the building boom and 64 percent of U.S. builders report low or very-low lot supplies. As for lending, builder loans for land acquisition, development and construction were up 17 percent “but they need to grow faster,” he said.
Dietz expects the multi-family housing forecast to be flat for 2017 at about 384,000 starts and then dip to 371,000 starts in 2018. Millennials tend to rent first and rent longer than other age groups, he said.
For the remodeling market, Dietz sees 1 percent growth in 2017 and 2 percent in 2018.
“We’re a little more conservative on remodeling than the other forecasts because existing home sales are flat and a lot of remodeling occurs prior to the sale or purchase of the home,” Dietz said. “But there are positive tailwinds including aging in place and energy efficiency.”