Home Builders See Blue Skies for 2014 Economy

Economists predict a mostly positive housing market for the coming year.

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Today at the International Builders Show (IBS) in Las Vegas, some of the industry's most prominent economists took to the stage to discuss their financial forecasts for 2014. Signs were generally positive for sales of both new and existing homes, based on key indicators among home builders and consumers.

The panel included David Crowe, Chief Economist at the National Association of Home Builders (NAHB); David Berson, SVP and Chief Economist at Nationwide Insurance; and Frank Nothaft, Chief Economist and Vice President at Freddie Mac.

A panel of chief economists discuss the housing market at IBS 2014: David Crowe of the National Association of Home Builders, David Berson of Nationwide, and Frank Nothaft of Freddie Mac

Consumers Will Have the Money to Buy

"The crux," says Nothaft, "is buyer affordability." He suggests that a predicted 3% overall economic growth for 2014 should translate into income growth and job growth, which in turn will affect housing. Green shoots have already appeared in durable goods sectors such as motor vehicles and home furnishings.

Some of the more vivid specters of the recession, like delinquent payments and foreclosures, are also down—particularly in the so-called "bubble states."

Rates on 30-year fixed mortgages are expected to remain attractive to consumers. While climbing slightly through 2013, they remain historically low compared to the last several decades. Currently around 4.4%, Nothaft anticipates that they'll rise by half a percentage point by the end of 2014.

Some of the more vivid specters of the recession, like delinquent payments and foreclosures, are also down—particularly in the so-called "bubble states" that were most affected during the recession.

Builders Are Worrying Less About Economy

Key indicators amongst home builders are also pointing in the right direction. When surveyed about their biggest concerns, "negative media reports making buyers cautious" and "buyers unable to sell existing homes" have fallen year-over-year since 2011. These have been replaced by new concerns such as the rising costs of labor and building materials, indicating a back-to-business mentality.

By the Numbers

Among the most notable predictions, the triumvirate panel sees new construction for renters on the rise. Multi-family housing starts should, they predict, rise 9% year-over-year for the next two years, and reach nearly 11% over the "normal" (defined by the 1995-2003 average starts) by the end of 2015.

Single-family starts, they predict, are headed for an even stronger recovery. Current estimates suggest 32% and 41% year-over-year growth rates for 2014 and 2015, respectively.

Existing and new home sales are expected to rise, but new construction looks to spike higher and more rapidly towards the end of 2014.


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