Economists and housing industry leaders delivered an optimistic message to homebuilding professionals last week at the International Builders’ Show in Las Vegas.
The show’s host, the National Association of Home Builders, set an upbeat mood for the annual gathering by predicting record attendance at the events of the second annual Design & Construction Week, which combined IBS with the Kitchen and Bath Industry Show, the International Window Coverings Expo, the International Surface Event, and the Las Vegas Market. After the show, NAHB confirmed that 125,000 housing industry professionals packed the five-show convention.
IBS attendance was 55,327, 8% higher than last year and the most participation the show has seen since the recession began, NAHB reported.
During the week’s seminars and panel discussions, speakers delivered a hopeful message about the near future of the housing industry.
Housing starts to increase
Three economists who spoke about the continuing housing recovery agreed that 2015 will be a better year than 2014 and predicted home starts to increase by 10%, to 26% overall.
Healthy job growth is making consumers more confident, and that is likely to translate into more home sales, they said. In turn, a healthier housing market will spur job creation in the construction and home products industries.
Economists at last year’s IBS predicted that home construction would increase by 20% in 2014. By year’s end, however, home starts had increased by 3%.
This year, NAHB Chief Economist David Crowe told the audience, will be a “better year” because “the overall economy is doing better.”
Still, the speakers outlined a few roadblocks that continue to slow the housing recovery, including a lack of new household formation by young adults who are delaying marriage and homeownership, as well as high student debt that prevents that same group from affording down payments and mortgage payments.
55+ market to take off
The market for 55+ homebuyers will continue the upward trajectory that it began in 2013, according to a researcher and a builder of homes for mature buyers.
"We are busier now than ever before,” Steve Bomberger, president of Wilmington, DE-based Benchmark Builders, said during a panel presentation. “And I don't think it's going to slow down anytime soon.”
One reason: Long-time homeowners who were reluctant during a down market to sell the houses where they raised their families have started listing their properties and buying new homes, said Bomberger, who serves as chairman of NAHB's 50+ Housing Council.
Paul Emrath, NAHB's vice president of survey and housing policy research, called the 55+ market “one of the healthiest segments of the overall housing market,” and noted that it is “likely to remain that way over the next several years."
Builders broke ground on as many age-restricted single-family homes in the first half of 2014 as they did during the whole of 2012, Emrath said.
Multifamily building to plateau
Although the latest Census Bureau data showed that the pace of multifamily construction is slowing, panelists at IBS predicted that demand for apartments and condominiums will remain strong this year.
The speakers said they expect the annual growth of multifamily starts to taper off to a sustainable “new plateau” that is higher than the historical average.
NAHB has forecast that the industry will build 358,000 units this year and 361,000 next year. Crowe said those numbers are based largely on NAHB’s Multifamily Production Index, which is a measure of how confident builders are in the market for their product.
Panelist Sanford Steinberg, a principal with Steinberg Design Collaborative in Houston, noted new multifamily buildings will include amenities like areas where tenants can store and maintain bicycles and wash their dogs; larger bathrooms with stand-alone showers; open floor plans; and high-end finishes.
Remodeling demand to inch up
The size of residential remodeling projects will expand, and home-improvement professionals could land more business from urban homeowners than in the past, speakers on an IBS panel reported.
While the panelists couched a projected 3% growth in the remodeling industry this year and another 1.5% increase in business next year as good news, Emrath conceded that 2014 “dealt a glancing blow to the residential remodeling business.”
In fact, while home-improvement contractors enjoyed a 7% growth spurt in the fourth quarter of 2014, demand is expected to taper off considerably this year. A report by Harvard’s Joint Center for Housing Studies noted that the lack of first-time homebuyers will contribute to a slowdown in demand for remodeling services.
"Existing home sales and house prices both hit soft spots in 2014,” Emrath said during the panel. But he noted: "We expect those drags are behind us in 2015.”