“My single-family forecast for 2014 is pretty aggressive--822,000 starts which is likely 200,000 more than 2013,” said NAHB Chief Economist David Crowe, speaking at an NAHB conference in Las Vegas. “There are five key points to the turnaround. Consumers are back, pent-up demand is emerging, there is a growing need for new construction, distressed sales are diminishing and builders see it.”
Mortgage rates, meanwhile, are expected to rise in 2014, but not enough to harm affordability, according to Freddie Mac Vice President and Chief Economist Frank Nothaft.
“Regarding mortgage rates, we've gone from dirt cheap to cheap, and I think we will see a gradual rise of about a half a percentage point to 5 percent in 2014," Nothaft said. But even at 5%, he said, “most markets will remain quite affordable.”
Household formations are on the rise, according to the NAHB. They’re currently averaging 620,000, up from 500,000 during the housing downturn. The U.S. was producing 1.4 million new households per year during the housing boom. New home sales, meanwhile, are averaging 8.7% of total sales. That’s still down considerably from the historical average of 16.1%.
But builder sentiment in the single-family market is generally good. The NAHB/Wells Fargo Housing Market Index, which measures builder confidence in the single-family market, has been above 50 for the last eight months. Any score above 50 indicates that more builders view conditions as good than poor.
The NAHB is predicting 1.15 million total housing starts for 2014. That’s up 24.5% from 2013’s total of 928,000. Single-family production is also expected to jump, with a projected rise of 32% in 2014 to 822,000 units. The NAHB projects an additional 41% jump in 2015 to 1.16 million units.
A resurgence in single-family production will spur housing growth in 2014, but challenges to the ongoing recovery remain, according to economists.