NAHB Predicts Continued Gradual Growth for Housing Market in 2016

Washington, DC, April 29, 2016—Steady job growth, affordable home prices, attractive mortgage interest rates and pent-up demand will help the housing market continue on a gradual upward trajectory in the year ahead, according to economists who participated in the National Association of Home Builders (NAHB) Spring Construction Forecast Webinar. 

However, supply side headwinds led by a shortage of construction lots and labor, along with tight access to acquisition, construction and development (AD&C) loans, continue to hamper a more robust recovery.

“Builders remain cautiously optimistic about market conditions,” said NAHB Chief Economist Robert Dietz. “2016 should be the first year since the Great Recession in which the growth rate for single-family production exceeds that of multifamily. And we see single-family growth accelerating in 2017 as the supply side chain mends and we can expand production.”

Steady job growth has bolstered consumer confidence and rekindled housing demand. Nationally, payroll employment has surpassed its pre-recession peak by a modest margin and only a small number of states lag behind pre-recession levels.

Looking at the forecast, single-family production is expected to post a 14% gain in 2016 to 812,000 units and rise an additional 19% to 964,000 units in 2017.

Using the 2000-2003 period as a healthy benchmark when single-family starts averaged 1.3 million units on an annual basis, NAHB is projecting that single-family production, which bottomed out at an average of 27% of normal production in early 2009, will rise to 64% of normal by the fourth quarter of this year and climb to 77% of normal by the end of 2017. Single-family production currently stands at 58% of normal activity.

“Consumer surveys suggest the ultimate goal of millennials is to purchase a single-family home in the suburbs,” said Dietz. “We see growth for single-family looking ahead. The recovery continues and is dictated by demand side conditions and supply side headwinds.” 

On the multifamily side, production ran at 395,000 units last year, above the 331,000 rate that is considered a normal level of production. Multifamily starts are expected to decline 4% to 379,000 units this year and rise 6% to 402,000 units in 2017.

Residential remodeling activity is expected to increase 3.3% in 2016 over last year and rise an additional 1.3% in 2017.