Most experts suggest easing regulations to improve low housing supply
A slight majority of experts expect the level of new single-family construction to remain below 1 million units until 2020, according to data from the Zillow Home Price Expectations Survey.
In the survey, Zillow asked over 100 economists, investment strategists, and real estate experts about their projections for the US housing market, particularly new construction activity.
In 2006, single-family housing starts hit a peak of 1.8 million before nosediving during the Great Recession. Construction activity has recovered since then to an average of 1 million units per month.
However, the panelists doubted that the level of new single-family construction would surpass the monthly average until 2022 or later. The most pessimistic predictions pushed this off until 2029, while the optimistic few set the threshold by the end of next year and a quarter targeted 2021.
Zillow’s research pointed out that the rate of US home construction has been underperforming over the past decade. Builders are having a hard time constructing large numbers of affordable homes due to issues like land scarcity, labor shortage, and high costs for permits and materials.
"The American housing landscape was shaped in a big way by the drive for the classic American dream; swaths of cities were set aside solely for single-family, detached homes, with big minimum lot sizes and slow local review processes," said Skylar Olsen, director of economic research at Zillow. "Jump ahead three decades and housing affordability is a major issue across the country. Those same practices now arguably limit the ability of the next generation to become homeowners. Without new homes to meet population growth and replace an aging housing stock, home buying is expected to move further out of reach.”
Olsen said that the most popular solutions among experts all ultimately proposed rolling back these rules to increase flexibility and get more projects done.
Meanwhile, 38% suggested reducing the required minimum lot sizes and another 38% recommended easing the land subdivision process for landowners.
The experts anticipate home values to grow by 3.6% in 2019, then moderate to 2.5% in 2020 and 2.2% in 2021, before edging up to 2.6% in 2022. On average, home values were increasing by 5.2% annually as of July.
"Overall, the outlook for US home prices remains positive in both nominal and inflation-adjusted terms. But it continues to soften, despite diminished mortgage rates and a low supply of entry-level homes," Pulsenomics founder Terry Loebs said. "Appreciation expected through 2023 has fallen to an average annual rate of 2.9% – the most subdued five-year panel-wide projection in the past seven years – and experts who believe there is downside risk to their forecast outnumber those who see upside by a ratio of more than four to one."
