NAHB Housing Construction Forecast Sunny for 2013 and Beyond

by Houston Agent

October 25, 2012

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The NAHB's housing construction forecast is quite optimistic for 2013 and 2014, though it does not deny that some problems remain on the horizon.

By Peter Ricci

The latest housing construction forecast from the National Association of Home Builders (NAHB) is looking quite sunny, with both the single-family housing market and multifamily residencies expected to post strong numbers in the coming years.

With rising home prices serving as the spark, the housing recovery is in now underway, the NAHB reports, though it does not deny that certain inhibitors – particularly the fiscal affairs of our national government – could prove challenging to housing construction’s prospects.

Housing Construction Forecast – 75 Degrees, Mild Chance of Rain

The NAHB’s rosy housing construction forecast, explained Chief Economist David Crowe, is the result of several positive factors in the housing market and overall economy, including:

Pent-up household formations.
Rising consumer confidence (something Fannie Mae has been tracking closely).
Increasing builder confidence, which, as we recently covered, it now at its highest level in more than six years.
And growing rental demand.

All of those factors, Crowe said, have led to the NAHB’s housing construction forecast, which predicts the following:

A 21 percent increase in singe-family starts in 2012, an additional 26 percent hike in 2013 and a 30 percent increase above that in 2014.
Multifamily housing starts are also anticipated to expand robustly, though their 26 percent increase in 2012 will decline a bit to 6 percent in 2013.

As this chart from the NAHB shows, housing starts bottomed in late 2011/early 2012, and are expected to progressively grow from then on:

Trouble in Housing Paradise?

As positive as the NAHB’s projections are (and the association also cited numbers from Mark Zandi of Moody’s that were equally promising), there are some troubling clouds on the horizon that could impact the housing construction sector, including tight financing requirements, faulty appraisals and a dwindling availability of development lots.

However, the number one threat to the housing recovery, as numerous outlets (ours included) continue to point out, is the dreaded fiscal cliff, which would, among many things, wreck havoc on the consumer confidence Crowe spotlighted – the confidence that has been so integral to the first steps of the housing recovery.