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Economists Expect Housing to Move Steadily in 2015, Pick Up Pace Next Year

house-graphupThe housing market will move steadily in 2015 driven by solid labor market improvements, low mortgage rates, an economy that is growing, and pent-up demand–but the pace should really pick up next year, according to economists who attended the National Association of Home Builders (NAHB) 2015 Spring Construction Forecast Webinar earlier this week.

"This should be a good year for housing, buoyed by sustained job growth, rising consumer confidence that is back to pre-recession levels and a gradual uptick in household formations," said NAHB chief economist David Crowe. "We expect 2016 to be even better, due to a significant amount of pent-up demand and an economy that will be entering a period of reasonable strength and consistency."

Millennials will be a key demographic to jump-starting housing sales, since the share of first-time homebuyers has fallen from its traditional level of 40 percent down to about 30 percent following the housing crisis. Crowe estimates there have been about 7.4 million lost home sales over the past seven years due to slow recovery and uncertainty in the job and housing markets.

"While some of these sales will never take place, this does indicate how many sales were lost as fewer households decided to move," Crowe said. "We expect at least some of these to return in the form of new home sales as job and economic growth continue to firm."

Crowe said that as the unemployment differential shrinks between millennials and other workers, first-time buyers should provide a boost to the housing market.

CoreLogic deputy chief economist Sam Khater, speaking on the topic of new home price growth and new home sales, said that overall sales volume is weak but is strong in some areas, particularly in southern markets such as Houston, Dallas, and Atlanta. He noted that the best large markets are in Atlanta and San Antonio, while the fastest growing markets are in Nashville and San Jose.

Coastal areas have seen the fastest growth in new home prices, according to Khater, since eight of the top 10 healthiest new home sale markets are located in either North Carolina, South Carolina, or Texas. He also noted that only three new sale markets – Nashville, Oklahoma City, and San Antonio – are larger today than they were in 2000.

Building on Khater's theme of housing being strong in some areas, NAHB senior economist Robert Denk said the rate of recovery for housing varies throughout the country by state and region.

"Housing demand is now being driven by population growth and employment and income growth," Denk said. "We are reconnecting to underlying fundamentals. We really have turned the corner."

Energy-producing states such as North Dakota, Texas, Oklahoma, Louisiana, Wyoming, and Idaho, have seen strong housing recovery, as well as other states such as North Carolina, South Carolina, Tennessee, Washington, and Colorado.

NAHB estimates that single-family production will be 81 percent back to normal by the end of 2016 after bottoming out at 27 percent of normal in 2009, based on a benchmark of 1.34 million units produced annually between 2000 and 2003 prior to the recession. The top 40 percent of states will be near normal production levels by the end of 2016, according to Denk.

"What we are seeing, no matter what bucket you are in, the numbers are getting better," Denk said. "There’s a broader recovery all around."

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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