Despite the challenges that remain in affordability, the NAHB outlook for homebuilding in 2020 remains highly positive
By Jerry Howard
The year 2020 will no doubt be a busy one. All eyes will likely turn toward the election. As such, NAHB will remain engaged with housing advocates on the key issue of housing affordability and the factors affecting it, including outdated zoning policies, excessively burdensome and costly regulations, and the need to develop the workforce of the future.
Our “Building the Dream” series of town hall events and videos will continue to educate the public and policymakers on the urgent need to resolve affordability challenges and explore new ways to take on this issue.
Builder confidence, as measured by the NAHB/Wells Fargo Housing Market Index, remains solid. The NAHB economics team is forecasting slight growth for single-family construction, supported by ongoing low mortgage rates.
But housing affordability headwinds remain. We will continue to see many of the same production constraints carry over from 2019, such as supply-side bottlenecks from the lack of skilled labor, rising building material prices, and significant regulatory burdens.
Wage growth is expected to increase, which is good for consumer spending and housing demand. The latest household formation data shows continued strength in the for-sale market and some softening for rental markets. These trends are consistent with demographic data that reveal a growing number of younger buyers are entering the market and increasingly seeking single-family homes to purchase. This process will continue to sustain demand for single-family homes in the years ahead.
Existing home inventory remains tight, and home prices continue to rise faster than incomes, a clear sign of housing scarcity. Solid housing demand exists but the construction industry continues to experience a labor shortage and data suggests it will not turn the corner quickly. There are currently 338,000 unfilled construction jobs. Without growth in the size of the labor force, it will be difficult for the building industry to continue adding workers at the current pace of just 50,000 per year.
Those unfilled jobs represent a huge barrier to housing production—and housing affordability—by limiting the overall supply chain of homes being constructed in a timely manner. At job sites across the country, homebuilders face delays and rising costs because we can- not find experienced building trades professionals for key parts of the building process.
It is our collective responsibility to produce a wide range of potential solutions to address the labor gap and develop the workforce of the future. At NAHB, we’re working hard by partnering with educators, state and local homebuilding associations, and our student chapters to build up a skilled workforce.
But sound policies must also be part of the answer. NAHB strongly supports expanding federal and state training and employment opportunities to prepare individuals for careers in construction. But there remains a bias against our industry. Funding for career and technical education lags far behind federal investment in academic and degree programs.
Through the Home Builders Institute (HBI), the workforce development arm of NAHB, the association helps lead career-building programs that include Job Corps, Pre-Apprenticeship Certificate Training (PACT), and Residential Construction Superintendent Certification for young people, veterans, displaced workers, and underserved populations.
As a partner in “Generation T,” NAHB is working with Lowes Home Improvement and others to offer jobs and training programs to help close the job skills gap and connect people to opportunities in the skilled trades.
As our economics team looks ahead, we should continue to experience overall GDP growth, but at a slower rate of 1.8 percent in 2020. NAHB economists expect the Federal Reserve to cut the federal funds rate one more time in the first half of 2020 and expects the 30-year fixed rate mortgage to remain below 4 percent for the foreseeable future.
Housing conditions remain positive for 2020 overall, but house price increases and the means to accumulate funds for a down payment will provide additional housing affordability challenges over the next year.
NAHB will continue to work on the range of issues that impact the housing market and keep housing a priority. We will work at the local and national level to defeat excessive regulations and strive to ensure the dream
of safe, decent, affordable housing for every American becomes a reality.
Jerry Howard is the Chief Executive Officer of the National Association of Home Builders. For more information, visit www.nahb.org.