According to the National Association of Homebuilders NAHB, the year-end housing numbers for 2013 indicate a strong performance for home building. Census data for December indicate that for the year 2013, on a three-month moving average basis, single-family construction was up 20%, multifamily gained 34.5%, and remodeling was up 14%. Total residential construction spending increased 18.3% year-over-year. However, new home sales were down 7% for December, reaching an annualized pace of 414,000 home sales for that month.
The NAHB noted that data for the final months of the year suggest lingering impacts from the declines in consumer confidence associated with the political uncertainty of the partial government shutdown. According to the NAHB, possible additional reasons for the slight year-end 2013 declines include weather and an earlier rise in interest rates. We have also heard these same concerns expressed by several home builders. On the other hand, the NAHB notes that data from the Federal Housing Finance Agency indicates that typical contract interest rates on conventional mortgages for new homes remain low: 4.24% as of December 2013. Higher home prices have also reduced affordability in some markets.
Determining Expectations for 2014
With the NAHB International Builders’ Show under way in Las Vegas, the NAHB suggests that this is a good time to review indicators that can help guide homebuilder expectations for 2014. The NAHB cites, as an example, its 55+ Housing Market Index, which was up sharply at the end of 2013.
On the other side of the age distribution, recent NAHB research found that the share of young adults living with their parents is up strongly in recent years. However, as the NAHB states, “To unlock this demand, job and income growth will have to increase for those under age 35, who have seen on average income declines in the past two years, compared to increases for older age cohorts.”