Homebuilding Outlook for The Remainder of 2014

There is some optimism in the single-family sector for the remainder of 2014.

Single-Family Building

Recent data indicates that the future will bring an increase in single-family building. The Census Bureaus and HUD released numbers last week showing that the annual pace of housing starts were down to 956,000, which is 14.4% below the July starts.

However, most of the decline was in the multifamily sector. In fact, multifamily starts were 32% less in August than they were in July. However, this should not be much of a surprise considering that multifamily starts have been volatile over the past eighteen months ranging from below 300,000 in certain months to over 400,000 in other months.

In contrast to the multifamily starts data, the pace of single-family starts for the month of August fell a negligible 2.4% from July. NAHB predicts that single-family starts will increase in the next few months. The HMI, which measures single-family builder market sentiment, increased four points in September and builder confidence has continued to increase since early 2014.

Home Buying

Conditions in the market indicate that home buying will continue to be a favorable and more desirable choice. An increased rental demand has caused rents to rise, on average, 1.4% over the last 12 months. Also, there has been a rise in consumer confidence. For one, there has been an increase in consumer credit availability. Also, more people are purchasing “durable goods,” such as furniture or other home items. Perhaps one of the most important incentives for home buyers has continued to remain favorable — mortgage interest rates continue to remain low.

However, recent labor market conditions seem to contradict this data. The Bureau of Labor Statistics in August reported an employment growth of only 142,000 jobs, and although unemployment fell to 6.1%, this is mostly because there are fewer people in the work force, as opposed to positive conditions for hiring.