2017 Forecast: 10 Percent Rise in Single-Family Construction
Continued Strength in Housing Demand Expected
Single-family home production will rise strongly in 2017 because of correspondingly high demand, but at the same time builders are worried about certain potential stumbling blocks, the National Association of Home Builders reports.
As the economy continues to grow, the NAHB has issued the following predictions: mortgage interest rates will average 4.5 percent in 2017 and 5.3 percent in 2018; single-family production should rise 10 percent in 2017 to 855,000 units and climb another 12 percent to 961,000 units next year; multifamily starts are expected to hold steady in 2017 at 384,000 units, or 1,000 units above last year's pace; and residential remodeling activity is anticipated to gain one percent this year over 2016.
The NAHB says 2016 will end with 1.16 million total housing starts being built, a 4.9 percent increase from the 1.11 million units in the previous year.
But supply-side issues could constrain future growth.
"While positive developments on the demand side will support solid growth in the single-family housing sector in 2017, builders in many markets continue to face the supply-side constraints of lots, labor and lending," said Robert Dietz, chief economist for the NAHB. "Sixty-four percent of builders nationwide report low or very-low lot supplies; the rate of unfilled jobs in the construction sector is now higher than the building boom; and acquisition, development and construction loans for builders -- while on the rise -- needs to grow faster to meet demand. The industry needs to recruit more workers and get more land in the pipeline, but it will take time."
However, the supply-side challenges are more than offset by sound economic growth, job creation, rising wages and other factors, Dietz added. Builder confidence is also up because of the collective belief that the incoming Trump administration will help lower regulatory costs.