NAHB 2019 Home Building Outlook: Market Forecast and Trends
Rob Dietz, Chief Economist, NAHB
LAS VEGAS — Realty News Report: Houston’s single-family housing market is showing signs of cooling as developers may have overbuilt in some segments.
That observation was one of the main takeaways from the National Association of Home Builders (NAHB) International Builders’ Show in Las Vegas.
NAHB Chief Economist Robert Dietz, speaking with Realty News Report on the sidelines of the show, pointed to a shortage of skilled labor as a primary challenge for Houston builders.
Nationally, NAHB projected 1.26 million total housing starts for 2018 and expected production to edge up slightly to 1.27 million units this year, a modest 0.8 percent increase.
New-home sales grew fastest in the South, led by Houston, then Dallas, Atlanta, Phoenix and Austin. These metros each averaged more than 1,000 new-home sales per month between November 2017 and October 2018.
Single-family starts were forecast at 876,000 units for 2018, with a further rise of about 2 percent to 894,000 the following year—still well below the 1.1 to 1.2 million units that demographic trends would support.
Dietz said ongoing job creation and steady household formation should sustain demand across much of the country. However, builders face multiple constraints: an ongoing shortage of construction workers, a limited supply of buildable lots, and tariffs on lumber and other essential materials.
Additionally, home price appreciation over the past year has outpaced wage growth, heightening affordability concerns for many buyers.
Frank Nothaft, chief economist of CoreLogic.
Frank Nothaft, chief economist at CoreLogic, said the South and West are expected to lead new-home growth in the coming year. He noted that metros with strong affordability, solid job growth and favorable weather experienced the highest increases in new-home sales over the past year.
One bright spot is townhome construction, which is expanding rapidly at an approximate 24 percent annualized growth rate.
Looking ahead, Dietz said interest rates are expected to rise gradually. He forecast the average 30-year fixed-rate mortgage to be about 4.81 percent this year and roughly 5.08 percent the next.
Attendees were also reassured by David Berson, senior vice president and chief economist at Nationwide Insurance, who said the near-term risk of a recession is low. Berson cautioned that economic growth could moderate modestly due to trade and tariff pressures, higher interest rates, and the fading fiscal boost from the 2017 tax cuts.
Berson expects the Federal Reserve to raise interest rates two to three times this year, with fewer hikes afterward. That tightening, combined with modestly higher inflation, should push 30-year mortgage rates up somewhat in 2019.
On the timing of the next recession, Berson said it remains uncertain but added that the probability increases when looking two to three years ahead.
