(Source: NAHB) – Sparked by rising home prices across much of the nation, the housing recovery is now under way, but fiscal uncertainties and other challenges could result in a bumpy ride in the coming months, according to economists participating in yesterday’s National Association of Home Builders (NAHB) webinar on the construction and economic outlook.

“We’re seeing a more robust housing sector than many other parts of the economy,” said NAHB Chief Economist David Crowe. “One of the reasons is we have finally begun to see on a national scale that house prices are picking up again.”

Crowe cited a number of other factors that are carrying the housing momentum forward. These include:

• Pent-up household formations
• Rising consumer confidence
• Increasing builder confidence in all three legs of the industry: remodeling, multifamily and single-family construction
• Growing rental demand
• More than 100 metros currently on the NAHB/First American Improving Markets Index

However, Crowe offered several cautionary factors that continue to put a drag on housing activity at this time – including builders who are experiencing difficulties in obtaining production credit, qualified buyers who are unable to obtain mortgage loans, inaccurate appraisals, seriously delinquent mortgages that are at least 90 days late or in foreclosure, and a limited inventory of developed lots in certain markets.

Other causes contributing to uncertainty in the marketplace include the looming “fiscal cliff” that will trigger mandatory budget cuts and tax increases at the beginning of next year, pending Dodd-Frank Act regulations that are making financial institutions hesitant to lend since they don’t know how the new rules will affect them, tax reform, and the future role of Fannie Mae and Freddie Mac in the nation’s housing finance system.

NAHB is forecasting a 21 percent increase in single-family starts this year to 528,000 units and a further 26 percent climb to 665,000 units in 2013.

Multifamily housing starts are expected to rise 26 percent this year to 224,000 units and 6 percent in 2013 to 238,000 units.

Optimistic Housing Outlook

Expressing a more bullish outlook on housing and economic growth, Mark Zandi, chief economist for Moody’s Analytics, forecast that GDP growth will range in the 2 percent range this year and next and “double that growth closer to 4 percent in 2014 and 2015.” At the same time, he expects job growth to go from two million per year to closer to 3 million in 2014 and 2015.

“A big part of this optimism is the housing market,” said Zandi. “I expect 1.1 million total housing starts in 2013, 1.7 million to 1.8 million in 2014 and over 1.8 million in 2015.”

Zandi noted a range of assumptions behind this rosy forecast, including the expectation that mortgage rates would remain very low, the availability of housing credit will improve as private mortgage lending begins to pick up, and the job market gains traction as policymakers work to resolve fiscal issues, which will ease market uncertainties.

Specifically, Zandi cited three critical fiscal policy concerns:

• The fiscal cliff. If policymakers do nothing, the combination of pending tax increases and spending cuts set to take effect in January could produce a fiscal drag of four percentage points, Zandi said, which would throw the economy back into recession. “Hiring will remain weak until this is resolved,” he said.
• Treasury debt ceiling. By late February or early March, the Treasury is expected to hit its debt ceiling. A failure to raise the ceiling would prevent the U.S. government to borrow to meet its existing legal obligations, including the issuance of monthly Social Security checks.
• Achieve fiscal sustainability. Zandi said that federal government expenditures as a percentage of GDP is 24 percent and revenues is 17 percent. He said this seven-point gap needs to be slashed to closer to two percentage points of GDP. “We need spending cuts and tax revenues to narrow future deficits,” he said. “If we can’t do that, bad things will happen.”

Acknowledging that these challenges won’t be easy, Zandi said his forecast is based on the assumption that Democrats and Republicans will eventually strike a deal on these contentious issues because each side has much to lose. Democrats, he said, don’t want to see tax cuts for the wealthiest Americans and Republicans don’t like the defense cuts mandated by sequestration.

If the nation has the “political will to address the fiscal issues in a reasonable way, I think we will be off and running,” said Zandi.

A Gradual Climb to Normal

Delving into the state statistics behind the national numbers, Robert Denk, NAHB’s assistant vice president for forecasting and analysis, cited a range of differences among the states in the amount of pain suffered during the recession and the progress that is being made in recovering.

The hardest hit states — such as Arizona, Florida, California and Nevada — bottomed out the furthest during the downturn and still have much ground to make up.

Meanwhile, several energy producing states – North Dakota, Texas, Oklahoma, Montana and Wyoming – will be back to normal levels of housing production by the end of 2014.

On a national basis, housing starts are projected to get back to 55 percent of normal production by the end of next year and 70 percent of normal by the end of 2014, Denk said.

ABOUT NAHB: The National Association of Home Builders is a Washington-based trade association representing more than 140,000 members involved in remodeling, home building, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. NAHB is affiliated with 800 state and local home builders associations around the country. NAHB’s builder members will construct about 80 percent of the new housing units projected for this year.

Fall is not usually seen as the hot season for buying and selling homes. Spring holds that honor. But, in fact, certain types of buyers are afield in the fall, and this fall could be busier than many.

Spring is the premier season for real estate sales because it leaves time for families to relocate in the summer, before school starts. And, of course, many homes look their best amid green leaves and flowers. Summer’s too hot for trudging from home to home, and winter days too short and cold.

But many homes do look wonderful surrounded by fall colors. Moreover, single people and couples without children don’t worry about school schedules, says HSH.com, the housing data firm. Average home prices are typically lower in the fall than in the spring, because buyers without children buy smaller homes, HSH says. (Fall is the bigger selling season in Florida and Arizona, pushed by “snowbirds,” mostly retirees trying to beat winter.)

New jobs or transfers force some people to move in the fall even if it’s not their first choice. And HSH says many people who must move, or want to, feel a rush to resettle by the holidays. Others want to lock in the tax benefits of homeownership before year-end – getting a few months of mortgage interest deductions, for instance.

HSH cites a survey by ERA Real Estate showing the breakdown of fall buyers:

• 27% first-timers
• 20% people trading up
• 17% downsizers, mainly retirees
• 14% investors
• 11% military relocations
• 6% vacation homes
• 5% other categories

So the seller who missed the spring shouldn’t give up and wait until next year, especially if the home is suited to singles or people without kids.

And this fall there’s another factor. Many experts are now firmly convinced that the housing market has started to rebound. Sales and price are up, and home-builder stocks are rising, reflecting a great deal of optimism.

What will it take to keep that optimism going?

Low interest rates help by making loans cheaper, and the Federal Reserve has promised low rates for the next couple of years.

Unemployment has not improved very much, but isn’t getting worse, either. If fewer people feel their jobs are at risk, they may be more willing to take on mortgages.

Rising prices will also be encouraging to the millions of homeowners who are underwater, owing more than their homes are worth. If they think they’ll eventually get above water, they’ll be less inclined to walk away from their homes. That will shrink the “shadow supply” of homes that could go onto the market through foreclosure or short sales. Reducing this supply will improve the supply-demand equation, helping to spur price gains.

Finally, as prices rise, even if only slowly, potential buyers will get off the fence before prices go up further. After years of slow sales, there may be pent-up demand – buyers eager for a reason to plunge into the market.

Once they do, that higher demand may push prices up some more, causing more buyers to start shopping.

All these factors are much more positive this fall than they were last spring, and that could trigger a rise in sales.

Does that mean you should rush to buy even if you’re not ready?

Probably not. The supply of homes remains huge, mortgage rates will most likely stay very low and even the most optimistic experts don’t expect home prices to rise by more than 1 or 2% a year for the next few years. The good deals will still be there next spring.

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Despite popular belief, a recent analysis of government data by the National Association of Home Builders (NAHB) reveals that the geographic distribution of households headed by someone age 55 or older is fairly even across most of the country, with more than 30 percent of all households in every state meeting this description. The study sheds valuable light on a key statistic for housing demand among active adults, as NAHB’s long-term forecast indicates that the share of 55+ households will grow every year through 2019, when the 55+ category will account for nearly 45 percent of all U.S. households.

“As more baby boomers approach retirement and the average age of the U.S. population increases, many businesses—including home builders—are showing increased interest in designing products that appeal to customers 55 and older,” said Paul Emrath, NAHB’s vice president of survey and housing policy research. “This research shows that 55+ developments should be possible in every state where population density is sufficient to support new communities of a size that can provide a variety of attractive amenities.”

The data show 43.9 million households are headed by someone 55 years old or higher, accounting for nearly 38 percent of all U.S. households. Among the 50 states and the District of Columbia, the share of households ranges from 31 to 45 percent. West Virginia tops all states, with 45 percent of its households headed by someone 55 or older, followed by Florida at 44 percent, Hawaii and Maine (each at 43 percent) and Pennsylvania and Montana (at 42 percent). At the other end of the scale, Utah and Alaska are the only states where less than one-third of the households are 55+.

For 97 percent of all 3,143 counties, the share of households age 55 or older is more than 30 percent. At the high end, 44 counties have a 55+ household share of over 60 percent. Mineral County, Colo., and Sumter County, Fla., are the highest ranked counties in the U.S. with 77 percent of their households headed by someone 55 or older. Sierra County, N.M., follows closely behind at 74 percent, while both Esmeralda County, Nev., and Wheeler County, Ore., come in at 71 percent each.

“The demographic that 55+ builders and developers are focused on is the largest growing group of buyers that we have ever seen in this age group, and it continues to grow,” said NAHB 50+ Housing Council Chairman W. Don Whyte. “It is also a group that is radically different from what it was only a few years ago. The customers are fitter, more computer savvy and plan to live an entirely different lifestyle from what they might have thought previously, or what we would have aimed at providing for them. Builders and developers in the 55+ housing industry have a unique opportunity to create communities that address the specific needs of the baby boomer population.”

View NAHB’s full analysis on 55+ households here.

 

Click Here for the Source of the Information.