October 31, 2014 – A growing economy, rising household formations, low mortgage rates and pent-up demand will help single-family housing production to rev up in 2015 while a growth in renters will keep the multifamily market at cruising altitude or higher, according to economists who participated in yesterday’s National Association of Home Builders (NAHB) 2014 Fall Construction Forecast Webinar.
“Single-family builders are feeling good. They are not overly confident, but confident enough to keep moving forward,” said NAHB Chief Economist David Crowe.
He added that the single-family sector will finish out the year much stronger than it began and set the stage for a robust 2015.
“This is mostly due to significant pent-up demand and steady job and economic growth that will allow trade-up buyers who have delayed home purchases due to job insecurity to enter the marketplace,” said Crowe.
A Bright Outlook
NAHB is forecasting 991,000 total housing starts in 2014, up 6.6 percent from 930,000 units last year.
Single-family production is expected to rise 2.5 percent this year to 637,000 units, increase an additional 26 percent next year to 802,000 and reach 1.1 million in 2016.
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 48 percent of what is considered a typical market in the third quarter of 2014 to 90 percent of normal by the fourth quarter of 2016.
Multifamily starts, which Crowe said are now at a normal level of production, are projected to increase 15 percent in 2014 to 356,000 units and hold steady next year.
Meanwhile, the NAHB Remodeling Market Index, which averages ratings of current remodeling activity with indicators of future activity, matched its all-time high of 57 in the third quarter of 2014 and has been above 50 for six consecutive quarters. A reading above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower.
NAHB is forecasting that residential remodeling will post a 3.4 percent decline in 2014 over last year, due in large part to slow activity in the first quarter caused by an unusual harsh winter throughout much of the nation. Residential remodeling activity is expected to rise 2.7 percent in 2015 and an additional 1.3 percent in 2016.
Housing Will Soon Be Undersupplied
Taking an even more bullish outlook, Mark Zandi, chief economist at Moody’s Analytics, said that prospects are good for continued gains in overall economic and housing activity.
“The reason is that job growth is quite strong,” said Zandi. “Currently, we are creating about 225,000 jobs per month, or 2.75 million per year. That is double the pace necessary to reduce unemployment and under employment, which augers very, very well for housing demand and the housing market more broadly.”
With the current supply of housing running just over 1 million units on annualized basis, Zandi said that this figure is well below what is needed for the longer run.
In the aftermath of the Great Recession, new household formations were depressed as the number of Millennials living with their parents or doubling or tripling up in apartments soared to about 3 to 4 million above normal, according to Zandi. As the economy continues to improve and these 18-to-34 year-olds begin to form their own households, this will boost overall demand for new housing construction.
“In a normal year, there should be demand for 1.7 million units,” he said, adding that each single-family home generates about 3.5 jobs over the course of a year and every multifamily unit produces 1.5 jobs over the same period.
Taking this one step further, Zandi said that increasing the housing stock by 700,000 units to meet this unmet demand would create 2.1 million jobs, which “would reduce unemployment by 1.5 percentage points.”
By the end of 2017, Zandi expects mortgage rates to rise from their current rate of about 4 percent back to their “equilibrium” of 6 percent, which he noted would be very consistent with a solid job market and solid housing market.
“The housing market will be fine because of better employment, higher wages and solid economic growth, which will trump the effect of higher mortgage rates,” he said.
He added that single-family starts could be closing in on 1 million units by the end of 2015 and multifamily production could go as high as 500,000 units.
Housing and Jobs Go Hand-in-Hand
Delving beneath the national numbers, Robert Denk, NAHB’s assistant vice president for forecasting and analysis, noted the housing recovery will vary by state and region.
“We are getting back to the point where economic conditions are dictating the strength of local housing markets,” said Denk. “It is very clear that those states with higher levels of payroll employment or labor market recovery are associated with healthier housing markets.”
Energy-producing states—North Dakota, Texas, Louisiana, Montana and Wyoming—where job growth is strong are also at the forefront of the housing recovery while Iowa and other farm belt states supported by agricultural commodities are also running above the nationwide average.
Meanwhile, states such as Nevada, Arizona, New Mexico, Alabama, Rhode Island and New Jersey that are coping with weak labor markets are also struggling to get their housing activity back on track.
Housing nationwide bottomed out at an average of 27 percent of normal production in early 2009 and the gradual and steady housing recovery now underway across the land will bring nationwide single-family housing starts to 68 percent of normal by the fourth quarter of 2015 and 90 percent of normal by the end of 2016.
In another way of looking at the long road back to normal, by the end of 2016 the top 40 percent of states will be back to normal production levels, compared to the bottom 20 percent, which will still be below 75 percent.
Have you visited Harding Mudge Bush’s new Watercolor shop in downtown yet? It’s gorgeous! What beautiful artwork!
The Lowell Sun wrote a story about Mr. Bush’s new studio a few months back:
AYER — On April 1, Harding Mudge Bush opened a store at 30 Main St. to sell his watercolor paintings and note cards. It is a return to downtown Ayer for Bush, who previously sold his art and ran a picture-framing business for 11 years on Park Street before it closed 22 years ago.
Partial to painting New England landscapes and architecture, Bush, 75, is as active as ever. With the warming weather, Bush plans to head out with easel and canvas.
Bush pointed to a framed picture of a Boston building which he said was one of his favorite projects.
The painting happened to involve his wife Sally.
Several years ago, Sally was working on a project at the New England Historic Genealogical Society on Newbury Street in Boston. Harding tagged along for the four- to five-day project, and set up his easel on Commonwealth Avenue. The subject matter of the painting is the First Baptist Church of Boston.
“I’d do research,” said Sally Bush. “He’d paint across the street and we’d meet for lunch.”
Bush also enjoys painting scenes in the North End. Bush recalled fondly the courtesies extended to him by passersby, especially on Salem Street.
“The coffee and eclairs would arrive,” said Bush. “The meter maid would ask where I was parked and disable the meter.”
Boston scenes play prominently in Bush’s portfolio, including pieces depicting the State House, Boston Garden and the iconic swan boats.
Bush’s work also catalogues Ayer’s streetscape with images from the present and past. One favorite subject matter for Bush is Ayer Town Hall.
“I love that building,” said Bush. “I’ve painted it five or six times.”
In one Bush iteration, the Victorian-era red brick building is dwarfed by an enormous elm tree which stood at the corner of Main and Columbia streets. Bush said the tree was there when he painted the picture but was later felled by Dutch elm disease.
Another captured Ayer landmark is the Park Street Diner (now the Sovereign Bank). Behind the restaurant, Bush included the western profile of the P.N. Laggis men’s clothing store, which has remained in business through three generations of Laggis family members since 1916.
Wine Crate Shelf
Once you finish off that crate of wine, reuse it as stylish shelving in the bathroom (or ask your local wine shop for an old wine crate to use). The wood crate will add a rustic style to your loo — and create an open shelving solution for bath salts, big bottles of shampoo or even a pretty vase of fresh market flowers.
Mounting tips: On the bottom of the crate, drill two holes in the middle of each side. Use a level to make sure it’s sitting straight and mark where the holes are on the wall. Drill in the anchors using the markers as a guide. Add screws to mount the crate into the wall. Design by Kate Antoske
Interested in seeing more? Check out the HGTV post here.
If you are a first-time home buyer who has been looking for the perfect opportunity to buy a new home, then the time is now. The current real estate market is perfect for everything from buying a new home to investing in the real estate market, which is why first-time home buyers and investors have been going head to head and competing for the best real estate on the market.
Why, exactly, is now a great time for first time home buyers to purchase a new home? From incredible deals on foreclosure and short sales to low interest rates and a projection for rising home prices in the future, now is the perfect real estate market for first-time home buyers.
Short Sales and Bank-Owned Homes
If you are a first-time home buyer looking to buy a new home in the current real estate market then you are more than likely looking for the best deals possible. Fortunately, with the number of foreclosures and short sales on the market, you can find discounted properties that are well below market value, which essentially allows for a lower monthly mortgage payment.
In fact, with the tax break on short sales that allows struggling homeowners to avoid paying federal taxes on their unpaid mortgages set to expire December 31, there are a ton of short sale properties currently on the market. Therefore, if you are in the market to buy your first home then start looking today, especially if you are interested in short sales and other distressed properties.
Plus, with mortgage rates still remaining incredibly low, there is nothing better than for a first-time home buyer to be able to purchase a home below market value and secure an incredibly low mortgage rate. This is the perfect recipe for a low monthly mortgage payment.
Rising Home Prices
Some people may be wondering “Why now?” The simple answer to that question essentially revolves around one thing: home prices. Home prices have already started to rise as the real estate market makes progress toward recovery; however, predictions for 2013 include home prices continuing to increase as the real estate market strengthens. Therefore, if you are looking to buy a new home for a discounted price, then do so now before home prices rise.
In conclusion, with the high number of distressed properties (including short sales and foreclosures) still on the market and low home prices (coupled with low mortgage rates), now is the perfect time for first-time home buyers to obtain a new home for well below market value and secure a lower mortgage payment. So, if you are a first time home buyer, start your search for your dream home today!