According to NAHB’s Chief Economist David Crowe, pent up demand continues to accumulate and create upward pressure on future housing demand. “Household formations, like older children leaving parents’ homes and young adults giving up roommates, have fallen to very low levels,” Crowe said.
NAHB estimates that more than 2 million households have postponed moving out on their own and bolstering housing demand, waiting for a stronger recovery. “An improving economy, stronger job growth, historically low mortgage rates and stable house prices will help turn this potential demand into actual demand,” Crowe said.
In the longer term, Crowe says household formation can only be postponed temporarily. “The underlying demographic forces are undeniable. The industry will need to deliver 17 million homes over the next decade just to keep pace with demand from a growing population,” Crowe said.
The main industry challenge now is to open up lines of credit for new housing production; a top NAHB priority. In addition, NAHB has made resolving problems with the appraisal process another top priority.
Looking forward, there are more signs that conditions in the housing market are showing modest improvement. Positive factors include:
- The economy is improving and sustaining job growth
- Low mortgage interest rates are keeping housing affordable
- Sustained sub-normal household formation has created pent-up demand that is helping to reduce excess housing inventory
“Consumers have not yet reached a level of confidence that is strong enough to begin lifting the housing market while builders continue to experience a great number of challenges with regard to competition from foreclosed and short-sale properties, low appraisal values and tight credit conditions,” said Crowe. Looking ahead, the fundamentals, such as economic growth and employment, are beginning to shape up and will eventually provide enough momentum to push housing forward at a healthy pace.”