Housing Affordability’s Biggest Threats

The National Association of Home Builders says home price growth and rising construction costs will be the biggest threats to housing affordability this year. Although the economy is expected to see some recovery this year, labor market improvement will be slow and much of the economy’s rebound is dependent on the vaccine rollout, says NAHB. It is forecast that a stabilization of the economy will come later in 2021 as more deployments of the vaccines will be dispersed between March and September. 

While home builder confidence remains near historic highs, single-family starts leveled off in November. Single-family home building increased only 0.4% from October to November. However, the annual rate of 1.19 million was a 10.1% gain from a year ago. For multifamily, a drop in permits suggests apartment construction declines in 2021. Recent data tracked in the NAHB Home Building Geography Index indicate that as part of the suburban shift — the changing geography of housing demand due to the rise in telecommuting and reaction to the virus — single-family construction in traditional second-home communities was up 24% on a year-over-year basis.

The gains for construction are needed to sustain growth in sales. New home sales were far outpacing actual construction in the fall, and as such, we expected that sales growth would slow. Although they were 21% higher than a year ago, new home sales in November declined to an annual rate of 841,000.

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