The housing recovery should gain momentum next year despite tighter credit conditions and other challenges, according to the National Association of Homebuilders.
“The cards are in play for a decent and fairly strong recovery in 2014 and particularly in 2015,” said NAHB Chief Economist David Crowe. “From the standpoint of GDP growth, housing has been a plus, growing at two, three and four times the rate of the rest of the economy in recent quarters.”
Home prices have seen double-digit increases over the last year as inventories tightened. That upward trend will probably slow, however, according to the NAHB.
“We expect to see price increases moderate in the next few years as we see additional inventory on the market and investors back away as the bargains disappear,” Crowe said.
New household formations are also on the rise again, the NAHB reported. During the economic downturn, many college graduates and young professionals were forced to move back in with their parents or delay moving out, and new household formation plunged from 1.4 million annually to 500,000. That figure is now up to 700,000 annually, according to the NAHB.
Challenges to the recovery remain, however.
“Credit conditions are much tighter now, builders are increasingly facing labor shortages, lot supplies are tight, building material prices are rising, and inaccurate appraisals are hurting home sales,” Crowe said. “You can’t charge more than you can get an appraisal for. Even though we are seeing price increases in labor, land and materials, 36 percent of builders recently said they had lost at least one sale over appraisals coming in below the cost of production.”
Still, the NAHB forecasts 924,000 total housing starts in 2013, up from 783,000 last year. Single-family production is expected to hit 826,000 next year and break the 1 million mark in 2015.