New-Starts Forecast Trims Its Sails

WASHINGTON, DC—Based on second-quarter results, Metrostudy says US housing starts are expected to advance gradually to hit 1.07 million this year. That includes 691,000 single-family homes as defined by the Commerce Department, a 6.6% increase over 2014's total. Multifamily housing starts are expected to increase to 379,000 in 2015, up 5.8% from last year, as the rental market continues to exhibit strength.

All three figures are down slightly from Metrostudy's forecast at the end of Q1. At that time, Metrostudy projected a total of 1.1 million housing starts, including 715,000 single-family and 385,000 multifamily.

Bradley Hunter, chief economist at Metrostudy, a Hanley Wood company, tells GlobeSt.com the downward revision “takes into account the latest information on actual housing starts, and our field reconnaissance as we have visited tens of thousands of homebuilding projects around the country and met with dozens of homebuilders.” He cites a number of factors behind the “slight sluggishness” reflected in the Q2 forecast.

For one thing, Hunter says, “access to mortgage money is improving for consumers, but it is still tight.” There's also the upward movement in home prices, “which naturally means a slower pace of homebuying” as some would be buyers were priced out of the market.

Furthermore, Hunter says that homebuilders are having trouble “finding enough lots in the locations they want, and in some cases, enough skilled laborers to build the houses in the projects they have.” On the positive side, he says, “We're anticipating a gradual pickup in the entry level of the market in the next 24 months.”

Regardless of sticker shock for some buyers, Metrostudy says that new-home sales are expected to increase 22.4% to 535,000 this year, up from 437,000 the year prior. Thje company points out that new-home sales saw a sharper peak-to-trough decline than overall housing starts, and didn't increase as much from the trough to '14, resulting in a “statistical catch-up” this year.

The best overall new-home markets are Denver, Austin, and San Antonio in terms of health and local new-home sales forecast. Regionally, the South dominates in terms of sales volume, with the largest new-home markets expected to be Houston, Dallas, and Atlanta.