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Economic Forecasts

Tightening Housing Supply Pushes Up Prices

Kiplinger's latest forecast on housing starts and home sales


GDP 1.4% growth for the year; a 2% pace in '17 More »
Jobs Hiring at 150K-200K/month through '16 More »
Interest rates 10-year T-notes at 1.9% by end '17 More »
Inflation 1.8% for '16, 2.4% in '17 More »
Business spending Flat in '16, slight gain in '17 More »
Energy Crude oil trading from $40 to $45 per barrel in Dec. More »
Housing Prices up 5% in '16, 6% in '17 nationally More »
Retail sales Growing 3.4% in '16 and '17 (excluding gas) More »
Trade deficit Widening 4% in '16 More »

The good news: More people are looking to buy a home. The bad news: The dearth of homes up for sale will push up prices, making it more difficult for people to afford a home in the near term.

In the longer term, the tight inventories of existing homes will spur home builders to create more housing, leading to more sales. The National Association of Home Builders/Wells Fargo Housing Market Index notes that builders are displaying a rising confidence in market conditions for new construction and are pulling more building permits.

See Also: All Our Economic Outlooks

Low inventory levels have in fact led to lower sales of existing homes in recent months and will continue to affect sales going forward. Existing-home sales ran at a seasonally adjusted rate of 5.33 million in August — down 0.9% from July’s pace and up 0.8% from last August — marking the second straight month in which sales of houses are down, despite strong buyer traffic in most states.


Home inventories decreased 10.1% year-over-year in August, and previously owned homes stayed on the market for fewer days compared with one year ago. Properties sold in August were typically on the market for 36 days, compared with 47 days in August 2015.

Home price increases should hover just above 5% for the rest of 2016, before picking up a tick next year in most of the country. The S&P/Case Shiller index, which analyzes home prices throughout the country, rose 5.1% in the 12 months ended in July. Twelve out of the 20 major metropolitan areas showed positive home price growth. At the top of the list: Portland, Oregon, with a 12.4% year-over-year gain, followed by Seattle with growth of 11.2% and Denver with a 9.4% increase.

Though housing starts took a breather in August — with total starts dropping 5.8% to a seasonally adjusted annual rate of 722,000 — year-to-year total housing starts are up 0.9%, compared with August 2015. Multifamily starts are up 16% year-over-year and single-family starts are up 9.1% year-over-year.

See Also: Money-Smart Tactics to Prosper in This Hot Housing Market