Single-family housing construction will see a boost this year due to a strengthening labor market, low interest rates, improving mortgage availability and growing pent-up demand, reported economists at the International Builder’s Show in Las Vegas Jan. 20-22.
“The signs point to a more robust year for housing,” said David Crowe, chief economist of the National Association of Home Builders. “Household balance sheets are returning to normal levels, home owners’ equity is increasing and significant pent-up demand is rising. More than 7 million existing home sales were postponed or lost during the downturn; and while some are lost forever, we should see some catch-up.”
The U.S. Commerce Department reports that overall housing starts were more than 1 million units last year. Single-family housing production rose 7.2% to a seasonally adjusted annual rate of 728,000 in 2014; it is estimated to rise 26% in 2015 to 804,000 units.
The ongoing housing recovery will see single-family starts steadily climb from 49% of normal production at the end of the third quarter of 2014 all the way up to 90% of normal by the end of 2016, Crowe said. Examining the recovery on a state level, by the end of 2016, the top 40% of states will be back to near normal production levels, compared to the bottom 20%, which will still be below 75%.
Construction consulting firm FMI predicts residential construction growth of 14% in 2015 and a bit lower through 2018. “Consumers have more confidence, so those looking to buy a home are more likely to do so as long as those numbers look good,” the report notes. “Nonetheless, there is still some reluctance for first-time homebuyers as more move to the city and look for rental residences; thus rents have gone up and vacancies have gone down.”
Multifamily construction is still expected to grow at a healthy pace of 13% in 2015, after reaching a near-record pace in 2014, notes FMI. On the multifamily front, NAHB is anticipating 358,000 starts in 2015, up 2% from last year.
Although NAHB’s Crowe and other panelists are optimistic about the future of multifamily housing market, there are still challenges that face the industry such as increasing costs and availability of labor. But demand for apartments is strong enough for developers to proceed in most markets, the panelists noted.
Another bright spot this year will be the over-55 market; the steady rise of this population group will influence housing.
“The 55-plus housing market has been one of the healthiest segments of the overall housing market, and is likely to remain that way over the next several years,” said Paul Emrath, NAHB’s vice president of survey and housing policy research. “When you look at age-restricted single-family starts, there were as many in the first half of 2014 as in all of 2012.”
Residential remodeling is set for modest growth in 2015, said experts at a press conference hosted by the NAHB at IBS. Remodelers appearing on the panel agreed with the forecast, citing home owners’ changing demographics and increased financial security as the cause. NAHB projects that residential remodeling spending on owner-occupied single-family homes will increase a modest 3% in 2015 over 2014, and another 1.5% in 2016.
“Existing homes sales and house prices both hit soft spots in 2014 that dealt a glancing blow to residential remodeling businesses,” Emrath said. “We expect those drags are behind us in 2015, an outlook consistent with the optimism expressed by remodeler members in our recent Remodeling Market Index survey.”
The National Association of the Remodeling Industry released Jan. 9 its fourth-quarter Remodeling Business Pulse data of current and future remodeling business conditions that continues to point to growth. About 67% of remodelers nationwide are seeing growth compared to only 15% who are reporting declines.
“There has been long-term improvement in sales value, which indicates that larger projects are making a comeback,” said Tom O’Grady, chairman of NARI’s Strategic Planning & Research Committee and president of O’Grady Builders. “Consumers are feeling that the economy will be good for the foreseeable future.”
While housing conditions are not the same in all areas of the country, the industry is optimistic about residential construction in the next few years. Is your company ready? Do you have enough staff? Do you provide the proper training? Do you have the right systems and processes in place so that your technicians — and your company — can succeed? Take stock of your business and make sure you can take advantage of the increased work that is coming your way.