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Improving health and economic conditions should push new-home construction to previously unanticipated heights in 2021, based on predictions from the chief economist of the National Association of Home Builders (NAHB).
“By the time we get to July, we’re going to see much of the economy reopened fully,” Robert Dietz said in an April 20 online economic update for members of the trade organization.
The organization expects growth in the nation’s growth domestic product to be at least 6 percent for 2021, the biggest jump since 1984 and easily erasing the 3.5-percent decline of 2020.
With the combination of better health metrics and a largely robust economy, the previously announced projection of 1.058 million new homes constructed in 2021 is now more likely to be in the range of 1.1 million – a growth rate of 10 percent to 12 percent above 2020).
A formal update is likely to come in June – “it’s going to be a really strong year,” Dietz predicted, indicating that 2022 and 2023 also would see their projected totals revised upward to as much as 1.2 million.
The rosy scenario comes despite headwinds for the construction industry, including higher materials costs, a staffing shortage, rising (if still quite low) mortgage-interest rates and the impact higher prices will have on the ability of Americans to purchase ever-more-expensive homes.
“Affordability is the key risk,” Dietz said, while “inflation pressures are undoubtedly building.”
For the short term, NAHB expects mortgage-interest rates to remain below 4 percent until 2022; it is in the 4-percent-to-4.25-percent range when demand will start to be impacted, the prognostication suggests.
But that’s 2022. Until then, “we’ve got a pretty good runway,” Dietz said. The remodeling industry, which has seen boom times ever since the initial pandemic pandemonium subsided nationally late last spring, is projected to see a 7-percent growth rate in 2021, about the same as 2020.