Listen to Brad's Taking Stock interview here >>
Listen to Brad's Taking Stock interview here >>

Single-family housing starts will be up 10 to 11% this year, and up 12% next year, said Metrostudy chief economist Brad Hunter on Bloomberg Radio’s Taking Stock with Michael McKee and Kathleen Hays this past Tuesday.

A stronger job market and continued low mortgage rates will be key to the expected 10% increase in single-family home starts this year, Hunter noted. According to the Bureau of Labor Statistics, the unemployment rate has dropped to 5.1% in September, down two-tenths of a percent from a month earlier, and 30-year fixed mortgage rates have fallen to 3.59% from last week according to Zillow. Both would help drive up the single-family starts, despite the flat reading for the past month.  

Housing starts in September were up 6.5%, with single-family only being 0.3% up, according to the New Residential Construction release Tuesday by the U.S. Census Bureau and the Department of Housing and Urban Development. 

“And also, (there is) more construction in what I call the drive-till-you-qualify areas,” added Hunter. More and more builders are building farther into suburban areas--the C locations or even D locations that they used to resist, due to the fact they can find more available (and affordable) lots there than in overpriced A and B locations.

“Lot development has been up 20% in the last year according to our research,” Hunter went on to explain. “And that’s where you’re gonna get that increase that’s gonna take place in 2016 and I think will extend in '17.”

Another contributing factor to the increase in single-family starts is that builders who have been almost exclusively targeting move-up or luxury buyers during the downturn are now starting to go after entry-level or first-time move-up buyers. In his opinion, entry-level no longer means a first-time homebuyer, but rather someone that already owned existing homes and hopes to buy a new home for the first time. DR Horton, for example, is making a big success out of their Express Homes that target entry-level buyers. The entry-level market is so viable that more and more builders will be willing to dip down lower than the move-up price where they’ve been, said Hunter.