LAS VEGAS (Real Estate Center) – “Cautious optimism” might best describe some experts’ expectations for the U.S. economy and housing market this year.
Speaking at the International Builders’ Show in Las Vegas Tuesday, National Association of Home Builders (NAHB) Chief Economist David Crowe said the economic forecast looks good, and he expects overall economic growth to continue to build this year, but that growth will be modest.
“The momentum is still not quite there,” Crowe said.
In addition, Nationwide Chief Economist David Berson said the United States faces three economic unknowns in the coming months: the debt ceiling, sequester and the continuing resolution to fund the government.
“There’s at least the possibility that if any of them don’t go well, maybe instead of modest economic growth as the year goes on, the economy actually stumbles,” Berson said.
However, Crowe said 2012 offered a couple of indicators of a strong housing market in 2013: home price increases in enough markets to affect the overall national number, and an increase in household formations.
“We were forming households at roughly 1.4 million per year in the boom period,” Crowe said. “That sunk to about a half a million a year additional households coming out of the typically younger population. And that low household rate simply means we don’t need more houses.”
Crowe said an excess of houses in some markets drove construction down, but that’s beginning to change.
“We’re up to 850,000 household creations per year. That’s been a stimulus behind new construction,” he said.
Crowe said that’s especially true of new construction for renters, because renters make up the entire 850,000 average gain.
While demand for rental units is expected to be strong this year, a couple of headwinds could impede demand for single-family homes.
“One of those is the fact that unemployment is still very elevated for this part of the economic recovery,” said Freddie Mac Chief Economist Frank Nothaft. “We have a national unemployment rate of 7.8 percent. And we have consumer confidence that has not rebounded as much as we normally see at this stage of the economic recovery. In other words, consumers are still concerned about their overall financial well-being.”
Editor’s note: Today’s RECON is a special report from the International Builders’ Show in Las Vegas. We will resume our usual twice-weekly publication schedule tomorrow.