When the Great Recession hit in earnest five years ago, many predicted a long, slow recovery for the U.S. housing market and massive changes to the designs of U.S. homes. Thankfully, these predictions never came to pass and are clearly in the rear view mirror based on recent economic forecasts from some of the leading housing agencies.
Housing starts strong
For example, 2013’s total housing starts came in at 928,000 units, up 19 percent over the previous year, according to the National Association of Home Builders (NAHB). This number foreshadows what’s coming down the pipeline and is why most woodworking companies are optimistic about a return to a strong market for kitchen and vanity cabinets and furniture.
In his outlook for the year, NAHB Chief Economist David Crowe recently set his single family forecast for 2014 at 822,000 starts, more than 200,000 above last year. NAHB is forecasting 1.15 million total housing starts (multifamily and single family) in 2014, up 24.5 percent from 2013. Single family starts are expected to be even better in 2015.
Adding validity to the NAHB projections, Kermit Baker, senior research fellow at the Joint Center for Housing Studies of Harvard University is forecasting 1.1 to 1.2 million total starts for 2014.
Home size myth debunked
In the depths of the recent economic slump, market analysts suggested the size of the American home was going to get smaller. However, a recent report from APA – The Engineered Wood Association, reveals that the average size of a new single family home built in 2013 was estimated to be 2,685 square feet, up 6.3 percent from 2012. This marks a record size for new homes built in a year in the United States. The average size of a new multifamily unit also grew 3.9 percent to 1,179 square feet.
These statistics show that when it comes to homes, U.S. buyers are still looking, and expecting, ample living space.
Market forces showing little impact
Also very different than expected are market forces working against a housing recovery. Crowe’s NAHB report highlights several headwinds that builders face. These include “rising building material prices, persistently tight mortgage credit conditions, difficulty in obtaining accurate appraisals, and limited availability in labor and developed lots.” Baker from Harvard raises the issue of household formations, historically a key driver of home building demand. Those numbers are still weak.
While household formations typically range from 1.1 to 1.2 million per year, current statistics show that the actual range is between 600,000 and 700,000.
Pricing still local
Last, but certainly not least, is a recent report from William Wheaton and the MIT Center for Real Estate regarding home price recovery. Its study analyzed single family home prices in 68 metropolitan areas around the nation and found staggering differences in home price recovery by market.
If you bought at the top of the market (2007) in Las Vegas, you will likely never see the value of your home at that level—ever. If you did the same in San Francisco, the forecast is for a 45 percent gain by 2022.
This study adds further relevance to forecasts that show our economic recovery, including the housing market, to be quite different by geographic region.
The bottom line is the best news: despite all the headwinds, the U.S. housing market brain trust agrees that 2014 will be a robust year for the housing market, and that 2015 will be even better.
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