Speaking at the ""National Association of Home Builders"":http://www.nahb.org/default.aspx (NAHB) International Builders' Show (IBS) in Las Vegas, economists expressed a positive outlook for homebuilders in 2014--with a few warnings.
[IMAGE]Pent-up demand, a growing economy, and a stronger job market should increase homebuilding in 2014, a welcome outlook for NAHB.
NAHB chief economist David Crowe noted, ""My single-family forecast for 2014 is pretty aggressive--822,000 starts which is likely 200,000 more than 2013."" Crowe noted five key points for his positive projections: ""Consumers are back, pent-up demand is emerging, there is a growing need for new construction, distressed sales are diminishing and builders see it.""
Despite the projection for growth in 2014, new-home sales are averaging just 8.7 percent of total home sales, a figure half of the 16.1 percent historical average. By the end of 2015, the top 20 percent of states will be back to normal [COLUMN_BREAK]
production, while the bottom 20 percent are expected to be below 84 percent.
The slow and steady housing recovery will bring nationwide housing starts to 71 percent of normal by the fourth quarter of this year and 93 percent of normal by the end of 2015, Crowe said.
However, problems could continue as builders face rising material prices, tight mortgage credit conditions, difficulties in obtaining accurate appraisals, limited availability in labor and developed lots, and skittish consumers who perceive Washington as gridlocked and uncertain.
Rising mortgage rates were another concern.
Frank Nothaft, VP and chief economist at ""Freddie Mac"":http://www.freddiemac.com/, expects a slight rise in mortgage rates in 2014, but not enough to harm housing affordability.
""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,"" said Nothaft. But even in spite of the raising rates, he said, ""most markets will remain quite affordable.""
He believes that many households looking to refinance have already done so, and the slight increase in mortgage rates will stem the tide of refinancing.
""As we move into the 2014 home buying season, it will be a market dominated by home buying originations rather than refinance originations,"" said Nothaft. ""This will be the first time since 2000 that purchase originations will dominate the market.""