Experts from the National Home Builders Association (NAHB), Freddie Mac and Nationwide Insurance were on hand at Design & Construction Week, held Feb. 4-6 at the Las Vegas Convention Center, to discuss the housing market.
They were hopeful about a positive forecast for 2014, due to a strong consumer demand, a growing need for new construction and a decrease in distressed sales.
David Crowe, chief economist for the NAHB, says the fact that consumers are purchasing durables—anything from home furnishings to vehicles—is a sign consumers are ready to move forward with another, larger purchase: Homes.
Young professionals, who may have been renting or even living at home with their parents, are ready to move forward in the homebuying process, he says.
But some existing homeowners are happy where they are, meaning an increase in new home sales can be expected, too.
“A lot of existing homeowners are reluctant to sell, as they may have a good mortgage rate they don’t want to lose or maybe they don’t have much equity, or any equity, in their homes,” Crowe says. “A way to make up for the pent-up demand is to build new homes.”
While homeownership rates reached their peak in 2005 at about 68 percent, the number has been lower since the recession, thanks in large part to high unemployment rates and large numbers of student loan debt for recent college grads.
But the homeownership rate could increase in 2014, especially when other factors, like the rise in rental rates, are considered.
“The rise in rent makes it a little more desirable to own a home,” says David W. Berson of Nationwide Insurance. “It makes owner-occupied housing relatively more affordable.”
The number of households formed this year should increase as well. Fewer households have been formed in the past few years because people have “doubled up,” or chosen to live together to save money.
“The trend continues to be upward—not a lot, but upward,” Berson says. “It suggests that once people get better jobs, they won’t double up, and perhaps, rather than looking only at renting, they’ll look at buying.”
While mortgage rates have been low recently, they’re projected to rise gradually, says Frank E. Nothaft of Freddie Mac. But it shouldn’t keep housing from being unaffordable in many markets across the country.
For example, if rates rose to 5 percent, with the typical family income and the typical home price in the market, and the homebuyers put down 10 percent on a home purchase, for many markets, mortgages would still be affordable, he says.
For first-time homebuyers, their main reason for buying was their desire to own their own home. For repeat buyers, it was for the desire to own a larger home. But first-time homebuyers know they need to get their finances in order and save up money for their purchase first before buying.
While home values are still flat in some neighborhoods, overall, values increased in every state in 2013, Nothaft says.