Between the is-it-getting-better-is-it-not-getting-better attitude in the housing market, a construction worker shortage, and a disinterested millennial generation—it can feel at times that the construction industry is precarious at best.
That is not to say though, that there aren't very specific trends becoming clear within the industry. As evidenced during the National Association of Realtors 2014 Realtors Conference & Expo earlier this month, industry insiders have plenty of things to mull over. From the housing market, legislative reforms, government programs, and the future of home sales, here are some things to keep in mind for 2015:
An optimistic future
NAR’s chief economist said he is optimistic about the near future of the housing market.
Yun told convention participants he expects sales of single-family homes to increase 41% next year. That’s higher than an earlier NAR estimate of 25.9%, and better than an estimate by National Association of Home Builders Chief Economist David Crowe, who projected an increase of 24.3%
The NAB outlook is more cautious, Crowe said, because too few first-time buyers are entering the market.
NAR released a report to coincide with the convention, which increases in home prices moderated in the third quarter, as more houses were put up for sale and investors continued withdrawing from the market.
Although home prices are higher than they were a year earlier in 73% of the 172 cities in the NAR study, they’re not rising as dramatically as owners who intend to occupy the homes become a greater part of the market.
A reprieve for Fannie and Freddie
Federal Housing Finance Agency Director Mel Watt confirmed during a speech to the Realtors that his agency continues to support the existence and operations of Fannie Mae and Freddie Mac.
Congress is considering several bills that would shut the agencies down.
“We’re not going to compromise the present liquidity in the marketplace,” Watt said. “We’re not going to compromise safety and soundness. We can’t contract Fannie and Freddie’s operations until we know that there is liquidity in the market from the private sector.”
NAR has said it will push for continued homebuyer access to the mortgage interest deduction and FHA-backed mortgages. It also opposes a shutdown of Fannie Mae and Freddie Mac, at least for now.
The lame-duck Congress
The Realtor-backed Terrorism Risk Insurance Act is likely to be reauthorized before it expires on Dec. 31, political strategists Mark Halperin and Jon Heilemann announced at the convention.
The act encourages private insurers to make terrorism insurance available and affordable for commercial properties. NAR has said this program is vital to commercial real estate and development.
But the authors of Double Down: Game Change 2012 told their audience they don’t expect any movement on congressional efforts to pass housing reforms because of the increased polarization between Republicans and Democrats now that the GOP controls both the U.S. House and Senate.
They said none of President Barack Obama’s reforms will make headway during the lame-duck session of Congress that ends in December.
An opportunity with foreign buyers
An online real estate expert encouraged Realtors attending the convention to insert themselves into international real estate transactions.
On a panel called “Managed Solutions for Reaching International Buyers,” Eleonore Rojas of Move Inc. said nearly 60% of international transactions happen because of referrals.
Realtors, said Rojas, whose organization operates NAR’s Realtor.com website, can help foreign investors “successfully navigate the U.S. market and find a property that meets their needs.”
An aging homeowner population
Homeowners are keeping their homes longer than ever before, an NAR study released at the convention revealed.
The average tenure in a single home is 10 years, “the highest level we have recorded,” Jessica Lautz, NAR's research director, told the group. That’s up from six years in 2008.
Lautz said homeowners are living in their homes longer, in large part, because they don’t want to sell until property values rise enough to reap them healthy profits.
Another reason: Homeowners who took advantage of ultra-low interest rates to refinance their homes don’t want to give up those good terms by moving into new homes that require new mortgages.
Lautz also noted that the age of the average homebuyer has crept up to 44—higher than in 2010, when the average buyer was 39. And with age often comes money: Today’s buyers’ average household income is $84,500, $10,000 more than in 2010.
The 3 forces that drive housing recovery
The three forces that determine whether real estate has a good year: energy, jobs, and millennials.
That was the message David J. Lynn delivered. The founder and CEO of Lynn Capital Management, Lynn chairs an NAR committee that publishes a Top 10 list of issues affecting real estate. Also on the list: healthcare, globalization, water, capital markets, the housing market, manufacturing, and agriculture.
Lynn said when energy costs are low, more manufacturers make products at home, which creates jobs. When people have good jobs, they can buy homes.
Unlike many housing observers, Lynn predicted the natural gas booms in Montana, Wyoming and South Dakota will last for years.
He acknowledge “the sting” that builders are feeling in suburban markets as millennials flock to cities to rent apartments. Still, he said once more young adults, who are delaying marriage and children, tie the knot, the suburban market will rebound.
A call to action
The head of the U.S. Department of Agriculture’s Rural Housing Service called on Realtors to promote government programs that help small town residents buy homes.
Administrator Tony Hernandez said his agency is set to simplify the Single Family Housing Guaranteed Loan Program, which provides 100% financing to homeowners who live in areas of fewer than 10,000 people and who meet credit and income standards.
“There is no shortage of money to help our neighbors,” he told the group. But he said too few rural homeowners take advantage of the assistance, possibly because they don’t know about it. “We need your help. We have to try to find a way to make sure we’re reaching those who need this assistance.”