From Builder Magazine:
Job gains and improving household confidence are expected to guide existing-home sales to a decade high in 2017, but supply and affordability headwinds and modest economic growth are holding back sales and threatening to keep the nation’s low home-ownership rate subdued, according to speakers at a residential real estate forum here at the 2017 REALTORS® Legislative Meetings & Trade Expo.
Lawrence Yun, chief economist of the National Association of Realtors, presented his 2017 midyear forecast and was joined onstage by Jonathan Spader, senior research associate at the Joint Center for Housing Studies at Harvard University, and Mark Calabria, chief economist and assistant to Vice President Mike Pence. Spader’s presentation addressed past and projected movements in the home-ownership rate, and Calabria dove into why reversing weak productivity and the low labor force participation rate are necessary to boost the economy.
The first quarter was the best quarterly existing sales pace in exactly a decade (5.62 million), and Yun expects activity to stay on track and finish around 5.64 million – the best since 2006 (6.47 million) and 3.5% above 2016. With several metro areas seeing hefty price growth, the national median existing-home price is expected to rise around 5% this year.
Although sales are currently running at a decade high, Yun believes the healthy labor market should be generating even more activity. However, listings in the lower- and mid-market price range are scant and selling fast, and home buyers are discovering they can afford less of what’s on the market based on their income.
“We have been under the 50-year average of single-family housing starts for 10 years now,” said Yun. “Limited lots, labor shortages, tight construction lending and higher lumber costs are impeding the building industry’s ability to produce more single-family homes. There’s little doubt first-time buyer participation would improve and the home-ownership rate would rise if there was simply more inventory.”
Housing construction has been uneven so far this year, but Yun does anticipate starts to jump 8.4 percent to 1.27 million. However, this is still under the 1.5 million new homes needed to make up for the insufficient building in recent years. New single-family home sales are likely to total 620,000 this year, up 8.4% from 2016.