Housing in Next 10 Years to Outshine Previous 10 Years

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From now through 2015, housing starts are unlikely to exceed last year’s record 2.073 million single-family and multifamily units, according to the long-term forecast just published by economists at NAHB. However, starts won’t be too far from the record in at least a couple of those years, and on average will exceed those of the previous 10-year period.

The real value of residential construction will exceed previous decades by an even wider margin, the forecast says, partly because the size of new homes is expected to continue drifting upward, but even more because of the addition of amenities and equipment demanded by baby boomers trading up.

Production, including manufactured homes, will average about two million units per year over the decade, “but average production will be lower in the first half of that period as excess vacancies are absorbed and only a few of the people born in the 1980s establish households,” says NAHB. The upward trend in housing foreseen for the next 10 years will be largely driven by demographic trends, the forecast says, and not by interest rates.

With strong competition from the condo market, the single-family share of new units produced will slip from the record 77 percent of last year to about 70 percent during 2010 to 2015, according to the forecast, which will still be higher than the 67 percent average share of the 1990s and the 57 percent share of the 1980s.

Driven by overall growth and aging of the adult population, the number of households is forecast to grow by about 1.5 million annually from 2006 to 2015, more than at any time since the early 1970s, when the initial household formations of the baby boom and an increase in the divorce rate, caused a surge in new households.