Us housing recovery builds momentum

Photo credit: Cyndie

The US housing recovery is building momentum, despite sales of new homes falling.

Sales of new build property plunged 11.5 per cent in September 2015, according to the latest data from HUD and the US Census Bureau. Sales fell 61.8 per cent in the Northeast, 8.3 per cent in the Midwest, 8.7 per cent in the South and 6.7 per cent in the West.

“Despite this monthly drop, our members continue to tell us that housing is moving in the right direction,” says Tom Woods, chairman of the National Association of Home Builders

Indeed, new-home sales year-to-date are up 17.6 per cent compared to the same period of 2014.

"We expect the market to continue improving at a gradual but steady pace for the rest of year," adds NAHB Chief Economist David Crowe.
 
The NAHB is equally optimistic about the coming 12 months, with steady employment and economic growth, pent-up demand, affordable home prices and attractive mortgage rates expected to keep the housing market on a gradual upward trend in 2016.

Shortages of land and labour remain headwinds to the overall recovery, along with the rising cost of materials. 13 percent of builders reported the cost and availability of labor as a significant problem in a 2011 NAHB member survey and that concern jumped to 61 percent in 2014.

The biggest factor, though, is employment.

"This recovery is all about jobs," continues Crowe. "If people can get good jobs that pay decent incomes, the housing market will continue to move forward."

The good news, Crowe says, is that total U.S. employment of 142 million is now well above the previous peak of 138 million that occurred in 2008. The one caveat is that job growth has been concentrated heavily in the service sector, which tends to pay lower wages than goods producing jobs.

"It is not surprising to see sales pull back in September following a strong August reading, especially after a few months of weak job creation," notes Crowe.

The association is projecting 719,000 single-family starts in 2015, up 11 per cent from the 647,000 units produced last year. Single-family production is projected to increase an additional 27 per cent in 2016 to 914,000 units. Multifamily starts are expected to rise 9 per cent to 387,000 units this year and post a modest 3 per cent decline to 378,000 units in 2016.