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Market Making Great Strides Toward Recovery
But Some Issues Continue to Plague Industry


The State of the Nation's Housing, released annually by the Joint Center for Housing Studies of Harvard University, contained both good news and not-so-good news.

The national housing market is on solid ground and looking better than it has in years, but it hasn't yet fully recovered. And certain hurdles remain that could derail a full comeback, the Joint Center for Housing Studies of Harvard University said.

In the State of the Nation's Housing, an annual report, the JCHS said the national housing market is now at a stage where its "momentum" is contributing mightily to the growth of the U.S. economy.

Sales, prices and construction of new single-family homes continue to rise, as has demand for rental units, all of which have been the main drivers of the housing market expansion thus far.

"Even more important, income growth has picked up, particularly among the huge millennial population that is poised to form millions of new households over the coming decade," the JCHS said.

There are some issues, however, that continue to plague the industry.

Chief among them is the fact the national homeownership rate has been declining for the past decade, which is unprecedented. It stood at 63.7 percent in 2015.

In addition, tight mortgage standards, a continual drop in personal income and a limited housing supply are also impeding the progress of the recovery. These issues are keeping many first-time buyers away from the market.

"Even though a rebound in home prices has helped to reduce the number of underwater owners, the large backlog of foreclosures is still a serious drag on homeownership," said Chris Herbert, managing director of the JCHS.

"As these lingering effects of the housing crash fade, homeownership may regain some lost ground, but how soon and how much are open to question," Herbert added.

There is also the problem of "income inequality," which has steadily risen over the past 10 years or so. "The question is not so much whether families will want to buy homes in the future, but whether they will be able to do so," Herbert said.

Also troubling is the demand for rental housing. Vacancy rates are down sharply, rents are climbing and multifamily construction is booming across the country, the JCHS said in the State of the Nation's Housing report.

Construction Industry Predictions For 2017
The chief economists for three of the largest construction-related associations in the nation have offered their forecasts for 2017.

On the single-family homebuilding front, the National Association of Home Builders is predicting double-digit growth next year.

"Our forecast shows single-family production expanding by more than 10 percent in 2016, and the robust multifamily sector leveling off," said Robert Dietz, chief economist for the NAHB.

"Historically low mortgage interest rates and favorable demographics should keep the housing market moving forward at a gradual pace, but residential construction growth will be constrained by shortages of labor and lots and rising regulatory costs."

In non-residential construction, the Associated Builders and Contractors says the commercial sector is poised to have a good year.

"Nonresidential construction spending growth will continue into the next year with an estimated increase in the range of 3 to 4 percent," said Anirban Basu, chief economist for the ABC.

"Growth will continue to be led by privately financed projects, with commercial construction continuing to lead the way. Energy-related construction will become less of a drag in 2017, while public spending will continue to be lackluster."

And the American Institute of Architects is predicting a strong 2017 as well.

"Revenue at architecture firms continues to grow, so prospects for the construction industry remain solid over the next 12 to 18 months," said Kermit Baker, chief economist for the AIA.

"Given current demographic trends, the single-family residential and the institutional building sectors have the greatest potential for further expansion at present."

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July 20, 2019, 7:42 am PDT

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