Taking this one step further, Zandi says that increasing the housing stock by 700,000 units to meet this unmet demand would create 2.1 million jobs, which “would reduce unemployment by 1.5 percentage points.”
By the end of 2017, Zandi expects mortgage rates to rise from their current rate of about 4 percent back to their “equilibrium” of 6 percent, which he noted would be very consistent with a solid job market and solid housing market.
“The housing market will be fine because of better employment, higher wages and solid economic growth, which will trump the effect of higher mortgage rates,” he says.
He added that single-family starts could be closing in on 1 million units by the end of 2015 and multifamily production could go as high as 500,000 units.
Housing and Jobs Go Hand-in-Hand
Delving beneath the national numbers, Robert Denk, NAHB’s assistant vice president for forecasting and analysis, noted the housing recovery will vary by state and region.
“We are getting back to the point where economic conditions are dictating the strength of local housing markets,” says Denk. “It is very clear that those states with higher levels of payroll employment or labor market recovery are associated with healthier housing markets.”
Energy-producing states—North Dakota, Texas, Louisiana, Montana and Wyoming—where job growth is strong, are also at the forefront of the housing recovery while Iowa and other farm belt states supported by agricultural commodities are also running above the nationwide average.
Meanwhile, states such as Nevada, Arizona, New Mexico, Alabama, Rhode Island and New Jersey that are coping with weak labor markets are also struggling to get their housing activity back on track.
Housing nationwide bottomed out at an average of 27 percent of normal production in early 2009 and the gradual and steady housing recovery now underway across the land will bring nationwide single-family housing starts to 68 percent of normal by the fourth quarter of 2015 and 90 percent of normal by the end of 2016.
In another way of looking at the long road back to normal, by the end of 2016 the top 40 percent of states will be back to normal production levels, compared to the bottom 20 percent, which will still be below 75 percent.
For more information, visit www.nahb.org.