A Look at New Homes: Onward and Upward in 2017

Housing Outlook

© 2017 Florida Realtors — Fueled by a growing economy, solid employment gains and rising household formations, single-family housing production will continue a gradual, upward trajectory in 2017, according to economists speaking at the National Association of Home Builders (NAHB) International Builders’ Show in Orlando, Fla.

“While positive developments on the demand side will support solid growth in the single-family housing sector in 2017, builders in many markets continue to face supply-side constraints led by the three ‘Ls’ – lots, labor and lending,” said NAHB Chief Economist Robert Dietz.

He said that 64 percent of builders nationwide report low or very-low lot supplies; the rate of unfilled jobs in the construction sector is now higher; and acquisition, development and construction loans for builders – while on the rise – needs to grow faster to meet demand.

“The industry needs to recruit more workers and get more land in the pipeline, but it will take time,” Dietz said.

However, supply-side challenges are more than offset by continued economic growth, ongoing job creation, rising wages and favorable demographics. Moreover, builder confidence is higher because builders expect the incoming Trump administration to help to lower regulatory costs.

“Regulatory requirements make up nearly 25 percent of the cost of a new home,” said Dietz. “Given those constraints, it is hard to build a $200,000 entry-level house.”

In a sign that more millennials are getting off the sidelines and jumping into the market, Dietz noted that townhome construction, which can be a useful bridge for millennials to transition to homeownership, is showing impressive growth and now constitutes 12 percent of all single-family starts.

Solid outlook

  • NAHB expects mortgage interest rates to average 4.5 percent in 2017 and 5.3 percent in 2018.
  • NAHB projects 1.16 million total housing starts in 2016, up 4.9 percent from the previous year’s total of 1.11 million units.
  • Single-family production is expected to rise 10 percent in 2017 to 855,000 units and increase an additional 12 percent to 961,000 next year.
  • Using the 2000-2003 period as a benchmark for normal housing activity when single-family production averaged 1.3 million units annually, single-family starts are expected to steadily rise from 56 percent of “a typical market” in third quarter 2016 to 75 percent of normal by fourth quarter 2018.
  • On the multifamily front, NAHB expects multifamily starts to hold steady in 2017 at 384,000 units, which would be 1,000 units above last year’s pace. While this level is slightly above trend, Dietz said the pace is sustainable due to demographics and a balance between supply and demand.
  • Residential remodeling activity is expected to register a 1 percent gain this year over 2016.

Affordability and demographics

CoreLogic Chief Economist Frank Nothaft expects mortgage rates to rise and home prices to moderate in the coming year.

“We anticipate that a stronger economy will translate into higher mortgage rates,” said Nothaft. “Meanwhile, we expect moderation in 2017 for rent and home price growth, but it will still be higher than inflation (thanks to) tight inventory in the housing market.” He said home purchase originations should rise 5.7 percent in 2017, and credit risk for home loans is substantially lower than 10-15 years ago.

The biggest housing issue in 2017 will be affordability, Nothaft said. “Mortgage rates are up three-quarters of a point since last summer and house prices are up. That starts to pinch a household budget.”

On the flip side, demographics will be very positive for housing and home sales going forward. “As millennials age from 25-to-30, that is a big potential base to expand the home buyer market,” said Nothaft.

Supply and demand

David Berson, chief economist for Nationwide Mutual Insurance Co., also expects mortgage rates to rise in the coming year, but he said it shouldn’t have a negative impact on housing demand.

“Higher mortgage rates will be offset by stronger wage gains and job growth, which suggests that housing demand will increase this year,” said Berson. “The question is, how much will supply go up?” He said most U.S. metro areas are relatively healthy, marked by solid job growth, mortgage delinquencies down to near-normal levels and strong, but not excessive house price gains.

A major concern going into 2017, he said, is that demand will exceed supply, which puts upward pressure on home prices.

“If there aren’t enough homes on the market, that will be a problem,” said Berson. “Price gains need to moderate. We can’t have six, seven or eight percent gains. That is not sustainable.” That situation could downgrade many markets from “healthy” to “neutral.”

© 2017 Florida Realtors

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NAHB Urges Congress to Extend Conforming Loan Limits

On Oct.1, 2011, conforming loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) will be lowered. The disruption that would occur with the lowering of the current loan limits would further damage the already fragile housing market and impede the economic recovery of our nation.

The National Association of Home Builders sent out a Legislative Alert on Sept. 15 asking members of our association leadership to contact their members of Congress and urge their support for immediate efforts to extend the current loan limits. Please join in this effort by telling your elected representatives that a drop in Fannie Mae, Freddie Mac and FHA loan limits would reduce home prices in major markets all across the country and that this is NOT the time to implement measures that would negatively impact the housing market.

Members of Congress can be contacted in two ways – by calling (866) 924-NAHB (6242); or by writing them via NAHB’s Builderlink web page. Contact: Scott Meyer (800-368-5242, x8144)

Proposed 20% Minimum Down Rule Would Severely Disrupt the Housing Market

Nation’s Building News Online:  A plan unveiled by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve on March 29 to require a minimum 20% downpayment for “qualified residential mortgages” would disrupt the fragile housing market and jeopardize the struggling economic recovery, according to NAHB.

Along with NAHB, diverse industry and consumer groups and housing finance experts took strong exception to the proposal, pointing out that it could prevent millions of credit-worthy borrowers from buying homes and would be a major setback for the housing industry as it slowly emerges from its worst downturn since the Great Depression.

“By mandating a 20% downpayment on qualified residential mortgages, the Administration and federal regulators are excluding those without huge cash reserves — which constitutes most first-time home buyers and many middle-class households — from a chance to buy a home,” said NAHB Chairman Bob Nielsen.

“Just do the math,” Nielsen said. “First-time home buyers historically average 40% of home-buying activity. It would take an average family 12 years to scrape together a 20% downpayment.

“This plan is nothing short of an assault on homeownership that could have a long-lasting negative impact on housing for generations to come,” he said.

Read more…

Poll: Americans still believe deeply in homeownership

WASHINGTON – March 18, 2011 – Despite a historic real estate market upheaval that sent foreclosure rates skyrocketing and home values plummeting, Americans still have a deep attachment to homeownership. Furthermore, they consider homeownership an integral part of an American Dream in which they still believe, according to poll results announced today by The Allstate Corporation and National Journal.

The eighth quarterly Allstate-National Journal Heartland Monitor Poll revealed that nearly nine out of 10 homeowners say they would buy their homes again. That percentage held true even among homeowners who said their home values had declined. Seven of 10 Americans say they would advise a friend or family member to buy a home as a long-term asset. However, while homeownership is perceived as a good personal decision, there is much greater uncertainty about whether expanding homeownership should be a government priority.

Although only 35% of respondents expect their personal financial situations to improve over the next year, three-fourths of those surveyed said it is still possible for people like them to achieve the American Dream, which the poll defined as the ability to advance as far as their talents will take them and live better than their parents did. A total of 59% said they currently are living the American Dream. Respondents identified owning your own home as one of the most critical parts of the American Dream, second only to raising a family.

“Owning a home continues to be the bedrock of the American Dream – even as incomes are down, jobs are scarce and families struggle to make ends meet,” said Thomas J. Wilson, Allstate chairman, president and chief executive officer. “Homeownership is viewed positively by the vast majority of Americans as both a place to raise a family and a sound investment. As a result, financial institutions and the government must work together to ensure that those who can afford their homes stay in them and this opportunity remains a viable alternative for all Americans.”

Despite their positive statements about owning a home, only 42% of those polled said that government’s push to expand homeownership created more stable communities, while 51% said these policies made communities less stable because it “encouraged people to take on too much debt” and led to foreclosures. Those surveyed split exactly in half – 46% on each side – on the broad question of whether Washington should continue or scale back its efforts to promote homeownership through policies such as tax incentives for first-time buyers and the mortgage interest deduction.

“Homeownership retains a powerful, almost tidal, grip on the American imagination,” said Ronald Brownstein, editorial director of National Journal Group. “Even the economic experiences of the last several years don’t seem to have dimmed the yearning for ownership. But we do see that the public is much more ambivalent about whether the nation’s focus on expanding homeownership is a good thing for the country overall.”

Key findings from the eighth Allstate-National Journal Heartland Monitor Poll include:

1) Americans still believe in homeownership as a sound investment. A solid majority (70%) of Americans would advise a family member or close friends to buy a home to build long-term assets.

* Just 27% disagree with this statement and say homeownership is too risky. This measure is essentially unchanged since the first Heartland survey in April 2009.

* Young Americans (aged 18-29) are less convinced, with 49% who agree that homeownership is a sound investment and 49% who say it is too risky.

* Asked to name the best investment, 24% of Americans say “buying a home,” which ranks behind “investing in retirement savings” (38%), but ahead of “saving money in the bank” (20%), and “investing in the stock market” (6%).

* Most Americans (63%) believe that the current housing crisis is temporary and will improve over the next several years.

* Surprisingly, 58% of those who believe the housing crisis will remain a serious problem would still recommend buying a home.

2) Most Americans (59%) say they are living the American Dream.

* Those most likely to disagree include groups that typically have less of a safety net in a struggling economy: low-income households (51% disagree), those with a high-school education or less (43%), African-Americans (46%), and single mothers (68%).

* Three-quarters of Americans believe the American Dream is still achievable for people like them.

* 58% of Americans believe that the ability to achieve the American Dream is affected more by their own skills and hard work than by the state of the economy. This belief in hard work cuts across every demographic and socioeconomic subgroup.

For more results or to download the poll, go here.

The poll was conducted March 4-8, 2011, among 800 adults via landline and 200 adults via cell phone.

Copyright © 2011 Allstate-National Journal Heartland Monitor Poll.

President Obama signs $858 billion measure that extends Bush tax cuts for two years

Had no action been taken, all of the marginal tax rates would have risen in January, with the top rate jumping to 39.6%. 

The tax package, estimated to cost $858 billion over 10 years, includes several positive provisions for NAHB members, as well as a couple of concerning aspects. 

Specifically, according to NAHB, it will: 

Reinstate the expired estate tax for two years at a rate of 35%. Adjusted for inflation, the first $5 million of an individual’s estate (indexed for inflation) would be passed on to heirs tax-free and couples could exempt $10 million of their estate’s value. While NAHB would prefer to see the estate tax eliminated, this was the best proposal that was offered. Except for the temporary repeal of the estate tax this year, the rate has not been lower than 45% since 1931. Without congressional action, the tax was scheduled to return next year with a top rate of 55% for estates larger than $1 million for individuals and $2 million for couples.


Provide an estimated 21 million middle-class households and small businesses relief from the Alternative Minimum Tax through 2011.


Maintain the current long-term tax rate on dividends and capital gains through 2012. The highest capital gains rate of 15% was expected to rise to 20% next year. Had no action been taken, dividend payments could have been taxed at a rate of as much as 39.6% for top earners.


Renew the New Energy Efficient Home Tax Credit (45L) for 2010 and extend it through the end of 2011.


Allow businesses to write off the full cost of capital investments (excluding residential and commercial buildings) after Sept. 8, 2010 and through the end of 2011.


Provide a 50% bonus depreciation in 2012.


Extend the expensing of brownfields remediation costs through 2011.


Eliminate the Pease itemized deduction phase-out through 2012. The Pease rule reduces the value of itemized deductions such as the mortgage interest deduction and the real estate tax deduction for high-income taxpayers.


Extend tax deductions in the Gulf Opportunity Zone for an additional 2 years beyond the placed-in-service date.


Extend the deductibility of Private Mortgage Insurance through 2011; however, the existing adjusted gross income limitation of $110,000 remains.