Spring Construction Forecast Predicts Continued Recovery Combined with Headwinds

May 10, 2013

Spring 2013 Construction ForecastEconomists at the National Association of Home Builders’ Spring 2013 Construction Forecast Conference Webinar predicted that both single-family and multifamily housing starts will post double-digit gains this year over last year, despite obstacles preventing even stronger growth.

“The broadening housing expansion is evidenced by the NAHB/First American Improving Markets Index, which now lists 273 metros areas out of a universe of 361, or three-quarters of the metropolitan areas in the U.S.,” said NAHB Chief Economist David Crowe.

The recent surge is almost all due to improvements in house prices across a broader number of markets, he added. Home price increases became more solid and consistent in 2012, and the latest data shows a nearly 6 percent annual rate of home price appreciation on a national basis.

Growth in the housing sector is rising at a much faster pace than the overall economy during this phase of the recovery, Crowe added. The residential fixed investment component of GDP was up 17.5 percent in the fourth quarter of 2012 whereas total economic output only registered a 0.4 percent gain. As demand for housing gradually picks up steam, supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves in the aftermath of the Great Recession.

Meanwhile, builders are facing increased building costs, difficulties in obtaining construction credit, overly restrictive mortgage lending regulations and political/economic uncertainty; all of these factors threaten to dampen consumer confidence and future housing demand.

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