Wednesday
October 1, 2014

New-Home Construction to Be Low for a While

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New-Home Construction to Be Low for a While

New-home construction has been low over the last couple years, and likely will continue to be low for the next two years, according to analysts at RBC Capital Markets.

What's Happening in the New-Home Market

While housing starts will likely hit the 1 million mark this year, that's still far below the average of 1.46 million starts per year over the last half-century, RBC's Robert Wetenhall notes in a new research report. Wetenhall predicts starts to reach 1.05 million in 2015 and 1.1 million in 2016.

"Slower demographic growth, a soft labor market, tight lending standards, and a sharp increase in the cost of home ownership will make incremental volume growth more difficult to achieve if [economic growth] continues tracking in the range of 2 percent to 2.5 percent," RBC analysts wrote in the report.

Instead, many builders are focusing on catering more to the luxury market by building pricier homes instead of trying to increase the overall number of units they're constructing.

Source: “Here’s What Will Hold Back Housing for the Next Two Years,” The Wall Street Journal (July 21, 2014)