Economy and Housing Market Projected to Grow in 2015
Economists at the National Association of Realtors are expecting growth in the economy and housing market leading into next year. This news comes despite an economy that has been unpredictable for the past few quarters.
Lawrence Yun, chief economist of the National Association of Realtors, gave an explanation for this prediction. “When you look at the jobs to population ratio, the current period is weaker than is was from the late 1990’s through 2007. This explains why Main Street America does not fully feel the recovery.” According to Yun, there is a pent up demand for houses coupled with expectations of job growth. These expectations are similar to those in a report released by Fitch Ratings and Oxford Analytica which examines the pattern of recover in the U.S. facing the latest major recession. Despite the U.S. and GDP have fluctuated quarter to quarter following the recession Yun states that there are no fresh signs of recession for Q2 of 2014.
One major key to a growth in the housing market is job growth. To date, the U.S. has recovered nearly all of the eight million jobs lost to the recession and employment is expected to grow 1.6 percent next year followed by 1.9 percent in 2015. In addition, GDP growth is expected to grow 2.2 percent this year and 2.9 percent in 2015. Eric Belsky, managing director at the Joint Center for Housing Studies at Harvard University, cites growth in the stock market and recovery in housing as major factors driving the economy.
When looking at 2014 housing figures and comparing them to those from 2013, one must keep in mind that 2013 saw impressive gains after four years of sagging sales. According to Yun, home price growth will be more moderate this year due to new home construction. In order to balance the market, housing starts will need to reach a long term average of 1.5 million to balance the market. Sluggish recovery in housing starts is greatly affected by the fact that construction costs are rising faster than inflation. Add this to the labor shortage in the building industry and sluggish starts are understandable.
Dennis McGill, the director of research for Zelman & Associates in New York, cited the U.S. Census Data showing an average of 720,000 housing starts annually from 2010 to 2013. Optimistically, his “projections over the next five years exceed an average of 1.9 million.” He added that there is a strong tailwind to housing starts with a come-back in single family construction.