WHAT'S AHEAD FOR HOUSING IN 2021?
Costs are flattening, demand is up, and pricing power is great. Can production and supply catch up?
It was as good a house as any to test out the market after the pandemic hit. Custom-built with insane views of?Seattle?and an easy drive into downtown Bellevue, but just far enough out to keep the urbanity at arm’s length. In every other way the house was like others JayMarc Homes was selling before 2020 happened: high end, high quality, and high ticket, with a location that hyped being both “in it” and “away from it all” at the same time. So in July, with the housing market rebounding out of a pandemic-induced pause, JayMarc listed the property with fingers crossed. The house sold that day for $4.8 million.
Likewise was the summer of dreams for home builders across the country. Fitful dreams, to be sure, with losses and sacrifices not discounted, but with a victorious reemergence that has the industry poised for successes not seen since Ronald Reagan first took office. In March and April, builder confidence as measured by the NAHB/Wells Fargo Housing Market Index had hit an all-time low of 30. By November, confidence had rebounded to 90, a data series high for the index that goes back to the mid-1980s.
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“It was a great year, and 2021 looks even better,” says NAHB chief economist Robert Dietz. “We expect the gains to continue based on the pace of new single-family sales, which continue to outrun the pace of single-family home starts. We could even benefit from a slowing in sales just to allow starts to increase and provide some equilibrium to the marketplace.”
With demand rising up, interest rates near rock bottom, and pricing power robust, the only things standing in the way of builders this year (absent more of the crazy-weird that colored 2020) are costs associated with the big Ls of lumber, land, and labor. But even there the pandemic may have pulled favor, enabling mills to recalibrate pricing with supply and adding tens of millions to the skilled and unskilled labor pools. Perhaps the big question for the year ahead is simply how fast can we build to meet near insatiable demand for single-family housing?