Led by a resurgence in single-family production, housing will continue its climb toward higher ground in 2014, but builders are still confronting several challenges that could hinder the pace of the ongoing recovery, according to economists speaking at the National Association of Home Builders (NAHB) International Builders’ Show (IBS) in Las Vegas.

“My single-family forecast for 2014 is pretty aggressive—822,000 starts which is likely 200,000 more than 2013,” said NAHB chief economist David Crowe. “There are five key points to the turnaround. Consumers are back, pent-up demand is emerging, there is a growing need for new construction, distressed sales are diminishing and builders see it.”

Consumer confidence has returned to pre-recession levels and household balance sheets are on the mend. Year-over-year household formations are on the rise and are now averaging 620,000 compared to just 500,000 during the housing downturn. At the height of the housing boom, the U.S. was producing 1.4 million additional households each year.

Meanwhile, new-home sales are averaging just 8.7 percent of total home sales, barely half the historical average of 16.1 percent. In the midst of the Great Recession, the cumulative lost number of existing home sales between 2007 and 2011 totaled more than 4 million, Crowe said. Moreover, the percentage of mortgages seriously delinquent has fallen and the decline has been larger in markets that had the highest rates.
NAHB is forecasting 1.15 million total housing starts in 2014, up 24.5 percent from last year’s total of 928,000 units.

Single-family production is projected to rise 32 percent in 2014 to 822,000 units and surge an additional 41 percent to 1.16 million units next year.
NAHB is anticipating 333,000 multifamily starts in 2014, up 9 percent from 306,000 last year.

Single-family home sales are projected to hit 584,000 this year, a 35.9 percent increase above last year’s 430,000 sales.

Meanwhile, residential remodeling activity is expected to register a modest gain this year over 2013.

The slow and steady housing recovery will bring nationwide housing starts to 71 percent of normal by the fourth quarter of this year and 93 percent of normal by the end of 2015, Crowe said. Viewing the recovery on a state level, by the end of 2015, the top 20 percent of states will be back to normal production levels, compared to the bottom 20 percent, which will still be below 84 percent.