Phoenix -- A packed ballroom of LBM industry executives, including dealers and vendors, received solid news at the opening session of the 2017 ProDealer Industry Summit.
"Home ownership rates are going up and I think the American Dream is alive and well.”Ivy Zelman, CEO of the Zelman & Associates - the housing market research firm - said there is plenty of room for growth and increased sales in the coming years during a presentation that focused how the housing industry might look in 2018 and beyond.
While some have argued that millennials are not interested in purchasing new homes, Zelman counters that members of the generation are marrying and having children at an increased rate. “As this massive tailwind comes through, people are going to need shelter -- and we don’t have enough,” Zelman said, while noting that 40% of all mortgages in the second quarter of 2017 were from millennials.
“Home ownership rates are going up and I think the American Dream is alive and well,” Zelman said.
Zelman & Associates forecasts single-family housing starts to increase 12 percent in 2018 and 9 percent in 2019 with home improvement spending growing by 5 percent next year. The New York and Cleveland-based research firm estimates that home improvement spending is up more than 6 percent this year.
A key to growth is the lack of existing homes on the market. Within the top 30 U.S. housing markets, entry-level homes are at a 2.8 month supply, while “first-move-up” homes are a 3.2 month supply, Zelman says. Overall, the nation’s housing supply is at a 30-year low. “It’s eerily similar in many parts of the nation.”
The need for more housing and new housing are ingredients for fueling a surge in new construction. Baby Boomers are aging in place and in no hurry to sell. Rather, they’re spending on upgrades and renovation.
“Millennials want new construction,” Zelman says. “But smaller homes of available product are desperately needed.” Given these conditions, the Cleveland-based analyst suggests that builders become “pioneers more than ever,” primarily due to land inflation, and build more entry-level homes in new, untapped areas.