Housing market firming up this year

Economists are optimistic that the housing market will continue improving this year. 

An expanding economy, strong jobs growth, rising consumer confidence and pent-up demand are stoking buyers’ interest in purchasing homes, all factors in driving the sector’s steady recovery. 

{mosads}”There are a number of positive indicators that provide solid evidence this will be a good year for housing and the economy,” said David Crowe, chief economist for the National Association of Home Builders (NAHB). 

Crowe noted that private-sector jobs growth has averaged 240,000 a month over the past two years, economic growth is expected to climb slightly above last year’s level and consumer confidence is nearly back to its pre-recession peak.

But builders have nagging concerns — the cost and availability of developed lots and labor, the price of building materials and federal environmental regulations — that they say could hamper the market’s recovery.

For this year, the NAHB is forecasting 1.26 million total housing starts, up 13.4 percent from 1.11 million last year. The 2015 figures were up 10.8 percent over the previous year and represent the best showing since 2007 as the housing market headed toward a crash.

Single-family production is expected to reach 840,000 units this year, a 17.5 percent increase from this year’s 715,000 and a 10.4 percent increase from 2014.

A healthy level of single-family starts is about 1.34 million a year.

The NAHB expects single-family starts to rise from 55 percent of normal production at the end of the third quarter of 2015 to 87 percent of normal by the end of 2017.

On the multifamily side, the NAHB is anticipating 417,000 starts in 2016, up about 5 percent from last year.

Frank Nothaft, chief economist of CoreLogic, said “cheap to low” mortgage rates will help buyers.

Nothaft expects overall home sales to rise 4 to 5 percent this year, led by a 13 percent gain for new home sales.

Sales volume and growth strongest in the South and West.

“There is stronger growth in households, population and demand for new housing” in these regions, he said at the builders international show this week in Las Vegas. 

Nationwide home prices are expected to increase about 4 to 5 percent above last year’s level and are projected to reach the 2006 peak by mid-2017, Nothaft said.

A Commerce Department report on Wednesday showed that housing starts declined 2.5 percent last month to a seasonally adjusted annual rate of 1.15 million homes, following a 10.1 percent jump in November.

“These numbers are in line with what our members are telling us that housing markets are improving, but lot and labor shortages continue to be a problem for many builders,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo.

Last month, single-family building fell 3.3 percent to 768,000 units from 794,000 in November.

Meanwhile, multifamily starts, which have been spurred by an increase in rental demand, fell 1 percent in December to 381,000 units.

Regionally in December, housing starts rose 24.4 percent in the Northeast but fell 12.4 percent in the Midwest, 3.3 percent in the South and 7.6 percent in the West.

Overall last year, permit issuance, a forward-looking indicator, increased 12 percent to 1.18 million units in 2015. But permits fell 3.9 percent in December.