Fueled by a growing economy, solid employment gains and rising household formations, single-family production will continue on a gradual, upward trajectory in 2017, according to economists speaking at the International Builders’ Show in Orlando, Fla. today.
“While positive developments on the demand side will support solid growth in the single-family housing sector in 2017, builders in many markets continue to face supply-side constraints led by the three ‘Ls’ – lots, labor and lending,” said NAHB Chief Economist Robert Dietz.
NAHB is projecting that there were 1.16 million total housing starts in 2016, up 4.9% from the previous year’s total of 1.11 million units. Single-family production is expected to rise 10% in 2017 to 855,000 units and increase an additional 12% to 961,000 next year.
Setting the 2000-2003 period as a benchmark for normal housing activity when single-family production averaged 1.3 million units annually, single-family starts are expected to steadily rise from 56% of what is considered a typical market in the third quarter of 2016 to 75% of normal by the fourth quarter of 2018.
David Berson, chief economist for Nationwide Mutual Insurance Co., also expects mortgage rates to rise in the coming year, but he said this should not have a negative impact on housing demand. “Higher mortgage rates will be offset by stronger wage gains and job growth, which suggests that housing demand will increase this year,” said Berson. “The question is, how much will supply go up?” He noted that most metro areas across the nation are relatively healthy, marked by solid job growth, mortgage delinquencies down near normal levels and house price gains that are strong, but not excessive.
A major concern going into 2017, he said, is that demand will exceed supply, which will put upward pressure on home prices.