The National Association of Home Builders lowered its forecast for U.S. single-family home starts this year and next as higher interest rates slow the pace of growth in the housing market.
Single-family home starts are expected to be 629,000 this year, lower than an April estimate of 672,000, the Washington-based group said in a report today. In 2014, the total is expected to be 826,000, compared with the prior forecast of 858,000. Work began on about 537,000 houses in 2012.
“We got unexpected softness in the spring,” Chief Economist David Crowe said during a conference call today. “We should pass the 1 million mark by 2015.”
Mortgage rates jumped more than 1 percentage point from near-record lows in May, slowing sales of new and existing homes, after Federal Reserve Chairman Ben S. Bernanke said the central bank may reduce its purchases of Treasury bonds and mortgage-backed securities. Tight credit and shortages of skilled labor, materials and ready-to-build lots in desirable locations also have limited production, Crowe said.
Each new single-family home creates the equivalent of three full-time jobs for two years, according to the trade association’s estimates, so a reduction in new construction lessens housing’s contribution to economic growth.
New single-family home starts will climb to about 1.16 million by 2015, according to the homebuilder group. That’s about 93 percent of “normal,” said Robert Dent, the NAHB’s assistant vice president for forecasting and analysis. Housing starts fell to a low annual pace of 353,000 in March 2009 after peaking at 1.82 million in January 2006.
The U.S. should produce about 1.7 million new homes and apartments per year to provide for population growth and replace obsolete residences, Mark Zandi, chief economist for Moody’s Analytics Inc., said during the conference call.
“Going forward, we’re going to be in an environment of undersupplied markets,” Zandi said.