US builders optimistic ahead of 2017

US builders are optimistic about the housing market in 2017, as demand is expected to support solid growth in the construction sector.

Fueled by a growing economy, solid employment gains and rising household formations, single-family production will continue on a gradual, upward trajectory in 2017, according to economists speaking at the National Association of Home Builders International Builders’ Show in Orlando.

“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 supply-side constraints led by the three ‘Ls’ – lots, labor and lending,” commented NAHB Chief Economist Robert Dietz.

He added that 64 per cent of builders nationwide report low or very-low lot supplies, that the rate of unfilled jobs in the construction sector is now higher than the building boom, and that acquisition, development and construction loans for builders 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,” he continued.

However, these supply-side challenges are more than offset by continued economic growth, ongoing job creation, rising wages and favorable demographics. Moreover, builder confidence is up on anticipation that the incoming Trump administration will help to lower regulatory costs going forward.

“Regulatory requirements make up nearly 25 per cent of the cost of a new home,” said Dietz. “Given those constraints, it is hard to build a $200,000 entry-level house.”

NAHB is projecting 1.16 million total housing starts in 2016, up 4.9 per cent from the previous year’s total of 1.11 million units. Single-family production is expected to rise 10 percent in 2017 to 855,000 units and increase an additional 12 percent to 961,000 next year.

Dietz noted that townhome construction, which he called “a useful bridge for millennials to transition to homeownership”, is showing “impressive growth”. Indeed, it now constitutes 12 per cent of all single-family starts, which he says could be a sign that “more millennials are getting off the sidelines and jumping into the market”.

 

US construction confidence to end 2016 on a high

19th December 2016

Confidence in the US construction sector is on course to end the year on a high, despite a decline in overall housing starts.

A sharp decline in multifamily starts pushed housing production down 18.7 per cent in November to a seasonally adjusted annual rate of 1.09 million units, according to data from the US Department of Housing and Urban Development and the Commerce Department.

While multifamily production dropped 45.1 percent to 262,000 units, single-family starts only dipped 4.1 per cent.

“Year-to-date, single-family starts are up 9.6 per cent and the overall trend in this sector remains positive,” says Ed Brady, chairman of the National Association of Home Builders (NAHB). “Builder sentiment is strong and we can look forward to growth in the single-family market in the year ahead as the industry adds workers and lots and Washington policymakers provide regulatory relief for small businesses.”

Indeed, builder confidence in the market for newly-built single-family homes jumped seven points to a level of 70 on the National Association of Home Builders/Wells Fargo Housing Market Index. This is the highest reading since July 2005.

“This notable rise in builder sentiment is largely attributable to a post-election bounce, as builders are hopeful that President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability,” comments NAHB Chairman Ed Brady. “This is particularly important, given that a recent NAHB study shows that regulatory costs for home building have increased 29 per cent in the past five years.”

 

US housing permits climb, despite decline in apartment activity

1st November 2016

US housing permits climbed in September, suggesting a positive direction for the country’s construction sector, despite a decline in apartment activity.

Housing starts fell 9 per cent in September, according to data from the US Housing and Urban Development and the Commerce Department, due to the drop in multi-family unit starts. Multi-family production declined 38 per cent to 264,000 units, taking combined single- and multifamily starts down in three of the four regions in August. The Northeast, Midwest and South posted losses of 36 percent, 14.1 percent and 5.3 percent, respectively.

However, single-family starts rose 8.1 per cent in September to a seasonally adjusted annual rate of 783,000 units. The number of overall permits issued, a marker of future building activity, also rose 6.3 percent to a seasonally adjusted annual rate of 1.23 million.

“Single-family starts posted their highest level since February and are consistent with builder sentiment, which has remained firm in recent months,” says Ed Brady, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Bloomington, Ill. “Low mortgage rates, along with solid permit and job growth should keep demand for single-family housing moving forward in the months ahead.”

“After strong readings during the summer, multifamily production pulled back in September,” says NAHB Chief Economist Robert Dietz. “Still, we expect the multifamily sector to post a good year in 2016, though down a bit from last year, which was likely the peak year for this cycle.”

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