Last week’s update on housing starts was good news for builders, but a senior economist at the National Association of Home Builders (NAHB) has even more encouraging projections for the next couple of years.
David Crowe, NAHB Chief Economist, said “we’ve come a long way, but we are not quite halfway back to normal.” He predicts housing starts will be at “normal” levels again in 2015 or by 2016 at the latest. What would be “normal” levels? He said that would mean about 1.6 million housing starts annually.
Even though Crowe is bullish about the long-term fortunes of his industry, he described an economic landscape that is markedly different from the way it appeared before the housing bubble burst. He said a lot of households are now renters after they could no longer afford their home. “People who lost their homes are still a household, but they're renting after a foreclosure. In a figurative sense, they’ve moved across the street. A lot of those homes are now being rented out.”
Added to that demand for rentals is the fact that virtually all young people are becoming renters and waiting longer in life before opting to buy a home. About three fourths of them are now a first-time renter. They will later transition to home ownership, Crowe said, when their income stabilizes and they simply become more comfortable with the idea that they will be in one location long enough for owning a home to make sense. The younger households will be more mobile. They won’t necessarily have a job that pays as well as the job held by their older brothers or sisters. The credit standards are tighter so these young people will have to have a higher credit rating and a higher down payment. “And they might just be more skittish about home ownership,” Crowe said. He continued:
“But, all that said, the polls that we take still show that the overwhelming desire is to become a homeowner someday, even among people who are underwater right now.
“The other thing that will happen to the renters is that rents will continue to go up and at some point that monthly payment could easily be a mortgage payment. That’s already true in some places and some scenarios, but it will become even more so.” This is the nationwide trend for the long term.
“This return to home ownership will come but it isn’t around the corner,” Crowe said. “I think that the underlying desire to have a home of your own is not going to disappear. The fact that we have a lot of people that will want that home in the long term is not going to change.”
However, if the trend is truly to get back up to 1.6 million housing starts by 2016, where will the skilled workers to build those homes be found? More on that in the days and weeks ahead on Construction Citizen.
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