Hardwood Floors February/March 2019

Approximately 20% of states should return

to normal levels of production by 2020.

Rising Economic Risks (Continued)

Although the broad macroeconomic trends, both nationally and across each state, will increasingly govern trends in housing production, the effects of the last recession have not fully faded. All states experienced a steep contraction in single-family building activity. Some states, such as Nevada, Illinois, California, and Georgia, fell greater than the national average when we measure single-family starts relative to normality or the average annual level between 2000 and 2003. These states remain further from returning to that level, in large part due to the depth of their specific decline. In contrast, states such as Wyoming, Louisiana, Alabama, Oklahoma, and Texas, to name a few, did not fall as far, although these states did experience a steep contraction in single-family building activity as well. Partly due to the comparatively shallower decline in response to the recession, the number of single-family starts in these states is closer to normality. However, states such as Idaho and Utah represent states where the decline was steep but the growth has been strong to the point that the number of single-family starts now exceeds their 2000 to 2003 level. This growth from recession-induced

lows reflects the strength of their underlying economies. Relative to normality, all states are expected to move closer to normality by the end of 2020. States across the West and the South will be the leaders, while many lagging states will be concentrated in the Midwest and the Northeast. Despite relatively strong underlying economic fundamentals, states like California continue to lag other states in their single-family production recovery because of the deep decline experienced during the recession. Approximately 20 percent of states should return to normal levels of production by 2020. However, the risk of a recession is rising, and it could soften production after our forecast window. If a recession were to arrive sooner than expected, then it could lower production to levels below our current forecast.

Single-family starts ended 2017 at 852,000, 96% above their recession-related low of 434,000 in 2011.

At the same time, single-family starts are 67% of the average level during the 2000 to 2003 period, just prior to the housing boom.

Danushka Nanayakkara-Skillington is the AVP, Forecasting and Analysis for the National Association of Home Builders (NAHB) in Washington, D.C. She can be reached at dnanayakkara@nahb.org.

22 hardwood floors www.hardwoodfloorsmag.com