2020 Forecast: New Home Construction to Remain Flat While Remodeling Soars

The Home Builders Association of Michigan (HBAM) announced today that next year they expect single-family new home construction to modestly contract for the 3rd year in a row. HBAM’s econometric model estimates that 16,006 new single-family home permits will be issued next year across Michigan. The state’s largest construction industry trade association noted that 2019 production levels should reach 16,129 new single-family homes by year end which represents a 1 % reduction from last year. In 2018 there were 16,337 single family permits issued and in 2017 there were 16,652. HBAM noted, however, that remodeling activity has increased by more than $1 billion in the state over the past year and is expected to reach nearly $8 billion in total activity in 2020.

“With job growth and demand for housing increasing, some might find this 2020 forecast surprising,” noted HBA Michigan CEO Bob Filka. “But the dysfunction in the housing marketplace, with a lack of workers, difficult local government development challenges and increased building costs, flat is the new normal for single family home construction in our state. The 16,000 plus units we expect to build next year is well behind our historical highs, and well behind the 26-28,000 units that economists say we should be building annually to meet long term housing demand in Michigan.”

The modest decrease in the HBAM forecast reflects national economists’ projections for continued slowing of North American Vehicle Production (NAVP) –a critical factor in our econometric model. Though not explicitly part of the HBAM model, shortages in the number of available construction workers contributes to the likelihood that single family home construction will not be able to rise above forecasted levels.

“Our industry needs more skilled workers, but it also needs more friendly environments for growth at the local level,” said Filka. “Too many communities continue to push housing investment away at a time when they need to start thinking about how they can attract such investment. The additional story behind these numbers is that homes for the average Michigander are no longer being built. Quite frankly, we have a missing middle housing crisis in our state. Because of escalating new home construction costs, many buyers that might otherwise build new are turning to existing fixer uppers and investing in significant renovations. This further reduces housing options for those middle or lower income households.”

HBAM has warned of a looming housing shortage in Michigan when in 2017 it issued a proposed 13-point action plan to aggressively attack challenges faced by the industry. Copies of the HBAM report, “Housing Challenges Threaten Our Economic Growth—Where Will Ten Million Michiganders Live?” can be downloaded at HBAofMichigan.com.l