The outlook for home construction and sales appear to be bright in the foreseeable future, says Robert Dietz, Ph.D., chief economist for the National Association of Homebuilders. Dietz spoke recently to a joint meeting of the Home Builders Association of Greater Chattanooga and the Greater Chattanooga Association of Realtors.
Dietz cited a number of economic factors as he spoke with the group, the first being the continued growth of the U.S. gross domestic product, which softened in 2016 but is above two percent for 2017 and projected to continue at this pace through 2019.
Next up was the ongoing economic expansion, which is now standing at 97 months and counting. Dietz said this is the third-longest expansion in U.S. history and is eclipsed only by periods in the early 60s and early 90s.
Another positive factor is the low unemployment rate, both locally and nationally. Dietz termed the labor market as being “tight” and addressed the shortage of skilled labor needed in the residential construction industry. The labor pool in this sector is aging, and vocational education and on-the-job training programs are needed to prevent this from becoming a drain on the industry in the near future.
Dietz also brought the group up to speed on household debt and its shift since the 2008 recession. As a result of reduced mortgage interest rates, the average home owner spends 4.4 percent of his or her disposable income on mortgage interest compared to 7.2 percent in 2008.
At the same time, overall consumer debt declined until 2013 and has now risen to 5.6 percent. To dig deeper, he noted that credit card debt is lower than 2008 levels, but automobile loans are 144 percent of the 2008 number and student loans have increased 220 percent in comparison to the same period.
Also on the positive side, Dietz addressed population growth, as Chattanooga is growing faster than the nation, which is a good sign for the housing industry.
One of the attractive points for moving to the Greater Chattanooga area is the overall affordability of housing. While home prices have rebounded since the recession and price correction, overall housing cost is well below the national average.
While the size of new construction lots is shrinking on average, the price of these lots is increasing. The cost of land and its development is impacting the overall cost of new construction, much like the increasing cost of lumber.
Dietz said developers are shrinking the lot sizes in efforts to control the overall cost of each home and support affordable housing.
The Greater Chattanooga Association of Realtors is “The Voice of Real Estate in Greater Chattanooga.” The association is a regional organization with more than 1,800 members and is one of more than 1,400 local boards and associations of Realtors nationwide that comprise the National Association of Realtors. GCAR services Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. Go to www.GCAR.net for more information.