Washington, DC, April 25, 2014 -- A growing economy, pent-up demand, competitive mortgage rates and affordable home prices will keep housing on an upward trajectory through 2015, according to economists who participated in the National Association of Home Builders 2014 Spring Construction Forecast Webinar.
However, several obstacles including tight consumer credit, shortages of lots and labor and rising materials prices are hindering a more robust recovery.
“Housing needs an improved economy,” said NAHB Chief Economist David Crowe, adding that the economy is expected to respond as payroll employment continues to grow and the unemployment rate slowly recedes from 6.7 percent in the first quarter of this year to 6.2 percent by the fourth quarter of 2015.
Consumer confidence is back to pre-recession levels and the purchase of motor vehicles and home furnishings are on the rise, indicating that consumers are increasingly willing to buy big ticket items such as houses.
Reflecting an increase in credit demand and economic growth, mortgage interest rates are projected to rise to 5 percent by the end of 2014 and 6 percent by the end of next year. Noting that these rates are still low by historical standards, Crowe said this would “not be a significant deterrent to expansion in the housing market.”
With new-home sales averaging just 8.8 percent of total home sales, barely half the historical average of 16.1 percent, Crowe observed that “this is another reason to believe that the new-home market will have to make up existing ground.”
However, he cautioned that builders continue to face a number of headwinds.
“Supply constraints related to lots and labor and rising lumber, gypsum and OSB (oriented strand board) prices are hurting the ability of builders to meet demand,” he said.
“Moreover, creditworthy borrowers, particularly younger families and first-time home buyers, are having difficulties in getting home loans.”