NAHB Chief Economist says more housing growth on the way
At the 2020 ProDealer Industry Summit, National Association of Home Builders Chief Economist Robert Dietz provided an uplifting outlook in regard to the near-term future of housing.
Dietz forecasts that single-family starts will rise 6% in 2020 and close to 950,000. This is a notable improvement over previous expectations but still below the 1.1 million starts needed, according to NAHB estimates. The projections are a big upswing from what the NAHB was predicting a few months ago.
The NAHB/Wells Fago Housing Market Index (HIM) reached a level of 83 in September, which is a data series high. In contrast, the HMI had a reading of 30 in April as the COVID-19 crisis heightened. “Confidence now is almost off the charts,” Dietz said.
High builder confidence is stemming from heavy buyer traffic, a lack of existing inventory, pent-up demand, and sales from homes that have yet to be started.
In the meantime, the median new home will grow in size as more people use their homes for added purposes, including home office space. Citing Google Trends data, Dietz also noted that people want more room for pets as adoptions have increased during the pandemic.
Dietz forecasts single-family housing growth of 3% in 2021 and 2% in 2022. Single-family rental, which is only about 4% to 5% of the overall market, is expected to see gains as well and presents another opportunity for growth.
The economist also forecasts 4% remodeling growth for 2020 followed by increases of 3% in 2021 and 2% in 2022. “Remodeling has clearly been a bright spot in housing,” Dietz said.
The latest set of forecasts from the NAHB is far removed from where the U.S. economy toppled to in the spring.
The second quarter of 2020 proved to one of the worst periods of the economy since World War II due to government imported shutdowns in response to the pandemic. The end result was a negative 30% growth rate for the quarter.
Dietz has revised his GDP growth rate for the third quarter to a 25% increase, noting some estimates place it at 30%. Overall, Dietz notes that it could take until 2022 to overcome “the Great Disruption.” That includes the need for finding a COVID-19 vaccine and government loosening more regulations.
“This was a real artificial downturn,” Dietz says.
Regarding unemployment, Dietz says were are currently close to an 8.3% rate based on NAHB analysis and it could diminish to about 7% by the end of the year. “The good news is we are below 10%. That was the peak rate during the Great Recession.”
The bad news is the rate of improvement is going to slow. Also, when people experience a period of unemployment longer than six months or greater, they begin to change life goals such as buying a home, undertaking a remodeling project, or purchasing an automobile.
“Ongoing improvement in the labor market is going to continue through 2022,” Dietz noted.