Homebuilders received a boost of confidence Thursday from national economists who continued to say that the economy is showing signs of improvement.
“The prospects for you all in the homebuilding industry are very good,” Mark Zandi, chief economist at Moody’s Analytics, said during the National Association of Home Builders’ semiannual construction forecast webinar.
“A lot of things can delay when we’ll see this ramp-up in activity, but I’m very confident we’ll see the ramp-up,” Zandi said, outlining a number of reasons for his upbeat perspective, as related to job growth, economic indicators and housing demand.
Middle-income jobs, not just low-paying ones, are making a recovery. Job openings have increased substantively, to the level of pre-recession days, Zandi said.
He estimates that the country will return to full employment levels by late 2016, bringing in the long-term unemployed, those who left the workforce, and part-time workers who want full-time positions.
“We’ll be running a very tight labor market by 2016,” he said.
Homeowners are also paying debts on time, allowing fewer delinquent payments.
For the first time in about a decade, nationwide markets are seeing home vacancies below the average trend, with a supply that is well below current and long-term demand.
Following a trend line starting in the early 1990s, the demand will be about 1.7 million homes annually, primarily due to new household formations.
And for a few years that could be even higher as Millennials -- 18- to 34-year-olds -- often living with parents, enter the housing market.
David Crowe, chief economist and senior vice president with NAHB, said this generation should start to see some income increases, allowing them to buy homes.
Housing starts and home sales have increased throughout 2014, Crowe said.
“We have caught up to underlying demand and we need to keep up, so I’m not suggesting we fall backward,” Crowe said.
An increased demand for housing spells good news for jobs tied to the housing industry, including construction, manufacturing, retail, financial services and landscaping.
Every single family home that goes up creates about 3.5 jobs over a year. An additional 700,000 homes could yield 2.1 million jobs, based on an even lower estimation of three jobs created per house built, Zandi said.
Robert Denk, assistant vice president for forecasting and analysis for the NAHB, said single-family housing starts are on the uptick but still at 48 percent of the 1.3 million average that was “normal” in the pre-boom days of the early 2000s.
They bottomed out at 27 percent in early 2009.
He forecast that by the end of 2016, housing starts will be back up to 90 percent nationally, although California may lag behind, about 80 percent to normal.
States showed a wide variation in the level of distress, with California among the worst. Numbers from Moody’s Analytics show that California bottomed at less than 20 percent of home starts, and is increasing slower than the national average, approaching about 35 percent now.
“No matter where you are, there’s been some level of recovery,” Denk said.
The average ratio of housing price to income is also increasing again, Denk said, but it’s not cause for alarm and instead shows a healthy recovery.
Most of the country’s metro areas offer single-family homes that are either undervalued or correctly valued, but Southern California has a significantly overvalued housing market, Zandi said, primarily because of foreign buying.
NAHB charts showed California among the states with the highest house price to income ratio, at about 140 percent of the historical trend.