The National Association of Home Builders reports that 52 out of 350 metros housing markets nationwide have returned to or even exceeded their pre-recessionary activity level, and the national market is expected to grow even stronger next year.
However, while Boulder’s and the rest of Colorado’s metropolitan areas continue to see improving markets, they are not among those that have already returned to their former glory.
The NAHB/First American Leading Markets Index, released Oct. 7, based on current housing permits, prices and employment data, shows that the nationwide housing market is running at 85 percent of normal activity.
In comparison, Fort Collins-Loveland is running at 86 percent of normal, earning the highest rank of any Colorado metro of 142nd, while Boulder’s activity level of 79 percent placed it at 240th. Pueblo was the lowest-ranked Colorado city at 311th with an activity level of 70 percent.
The LMI seeks to identify those areas that are now approaching and exceeding their previous normal levels of activity, according to the NAHB. More than 350 metro areas are scored by taking their average permit, price and employment numbers for the past 12 months and dividing each by their annual average over the last period of normal growth. For single-family permits and home prices, 2000-2003 is used as the last normal period, and for employment, 2007 is the base comparison. The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics.
Here’s a look at how Colorado’s metros housing markets compared with those across the nation:
And NAHB expect the national housing market to continue to improve as it heads into 2014.
“The cards are in play for a decent and fairly strong recovery in 2014 and particularly in 2015,” says David Crowe, chief economist for the NAHB. “From the standpoint of GDP growth, housing has been a plus, growing at two, three, and four times the rate of the rest of the economy in recent quarters.”
As reported by the National Association of Realtors, Crowe spoke at the NAHB’s Fall 2013 Construction Forecast webinar, noting that a the double-digit increase in home prices over the past year encouraged a housing rebound. He warns the price increases won’t last.
“We expect to see price increases moderate in the next few years as we see additional inventory on the market and investors back away as the bargains disappear,” Crowe says.
Household formations, delayed during the recession as young professionals sought more affordable housing situations, are also helping the recovery along, according to economists speaking at the webinar.
The NAR reports that during the height of the housing boom, the U.S. produced 1.4 million additional households each year, while that number fell to 500,000 per year during the recession. That figure has risen to 700,000 today.
While the future is becoming more attractive, the housing market is still facing challenges, economists note.
“Credit conditions are much tighter now, builders are increasingly facing labor shortages, lot supplies are tight, building material prices are rising and inaccurate appraisals are hurting home sales,” Crowe says. “You can't charge more than you can get an appraisal for. Even though we are seeing price increases in labor, land and materials, 36 percent of builders recently said they had lost at least one sale over appraisals coming in below the cost of production.”
NAHB made some of the following projections in housing starts:
Housing starts in 2013 are projected to reach 924,000 — up 18 percent from last year.
Single-family housing starts are expected to rise 17 percent this year and an additional 31 percent next year. NAHB projects that single-family production will surpass the 1 million mark in 2015.
Multifamily starts are expected to rise 20 percent in 2013 and another 10 percent in 2014. Crowe characterizes that as a “normal level” of multifamily production.
Sources: NAHB and NAR
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