Housing forecast predicts strong growth, demand for decks, doors, windows

LAS VEGAS — Demand for new single-family homes is projected to increase by as much as 26 percent in 2015, and if it does, building material makers will be supplying siding, windows and decks for 804,000 dwellings.

That's the ambitious outlook given Jan. 20 by David Crowe, chief economist for the National Association of Home Builders, in a panel talk at the International Builders Show in Las Vegas.

Crowe gave a long list reasons for his positive forecast, including economic growth near 4 percent in the last half of the year, employment gains averaging 250,000 a month in 2014, consumer confidence returning to pre-recession levels, and significant pent-up demand.

“My rough estimations are we lost or postponed about 7 million existing home sales,” Crowe said. “The normal flow of demographics leading people to move — a new job, more people in the family, fewer people in the family, more income — all those forces were continuing but the moves didn't take place because people were nervous about their economic future. They didn't have sufficient equity. There were a lot of financial reasons behind the slump.”

However, Crowe sees the flow normalizing and catching up a bit in the housing industry to a point where 2015 will be more robust than last. That shouldn't be hard, he added, considering 2014 wasn't a great year. The final number isn't in but the data to date indicates there were only 641,000 single-family housing starts in 2014.

Crowe had predicted 822,000 single-family starts for last year. He said his forecast was off because of the long, cold winter hampered construction and kept people from shopping for new houses. Then, an interest rate hike followed.

“That compounded and extended the slow beginning,” Crowe said. “We had a decent ending of the year but it didn't make up for the slow start.”

Crowe's colleagues said they hope he is right but they think his projection is too aggressive again.

Some 10 percent of homeowners are still underwater — they owe more on their homes than the home is worth — and it's taking a long time for mortgage lending standards to ease up, said David Berson, chief economist for Nationwide Mutual Insurance Co.

“Those owners probably won't be looking to buy a house because they don't want to bring money to the table,” he said.

Also, the real acceleration in job growth didn't kick in until about six months ago so Berson said a sense of insecurity remains. He put the unemployment rate at about 5.5 percent but said it could be double digits if the people who gave up looking for employment or took part-time jobs are counted.

Berson also described wage growth as disappointing. Then, there's debt, particularly student debt. He said college graduates have an average of nearly $30,000 of loans. By another measure, which reflects the number of students who don't borrow, the median student debt — half above and half under — is $15,000.

“That's not a lot if you have a good job,” Berson said. “As the job market gets better, and I'm convinced it will, as wages start to go up, there will be fewer recent college grads getting jobs at $12 an hour.”

Those grads then will move out of their parents' basements.

“The real slowdown in household formations has come from millennials,” Berson said. “Those people who would normally be in the age bracket for the majority of first-time home buyers.”

Frank Nothaft, chief economist for Freddie Mac, projects single-family housing starts will be up 15 percent in 2015, spurred by 3 percent economic growth for the year.

“That's significant,” he said. “If that comes to pass it will only be the second year in the last decade where the macro economy grew at 3 percent or better.”

That should translate into more jobs and better-paying jobs, which support household formations. Combined with low mortgage rates, millennials and young families should be in the position to save and buy homes.

For multiple-family housing construction, Crowe expects a slight increase to 358,000 starts and he sees spending on home remodeling going up 3 percent in 2015.

Although his forecast of 804,000 new single-family homes is very bright, he said it still lags below the normal level of 1.3 million to 1.4 million seen in the past.