Housing Market Poised To Be Stronger in 2014

According to the National Association of Home Builders’ (NAHB) Fall 2013 Construction Forecast, the ongoing housing recovery is predicted to continue its momentum next year. However, there are a few challenges to overcome.

Featured in the recent AMSA Today, the article details why experts are optimistic. There was a double-digit increase in home prices over the past year, which was credited to “tight inventories of new and existing homes for sale and gradual gains in employment.” This also led to families saving money and getting rid of personal debt.

Rising households were also delayed due to college graduates moving back in with their parents. During the recession, the number of additional households only reached 500,000. Today, it is back up to 700,000. To put things in perspective, the U.S. was producing 1.4 million households at the peak of the housing boom.

Mark Zandi, chief economist at Moody’s Analytics, which is a company that offers best practices for measuring and managing risk, cited three other reasons for the optimism:

  1. The fiscal drag on the economy will continue to fade in the coming years.
  2. The private economy has reduced leverage and is getting their balance sheets in order.
  3. Demographics make a “compelling argument” for the strengthening of the housing market.

As for the challenges, these include tighter credit conditions, labor shortages for builders, tight lot supplies, rising building material prices, and inaccurate appraisals.