Mortgage rates may be trending down at the moment — but what comes down will go up as the year progresses, according to several key housing economists who spoke at the recent International Builders Conference in Orlando.

Mortgage rates may be trending down at the moment — but what comes down will go up as the year progresses, according to several key housing economists who spoke at the recent International Builders Conference in Orlando.

However, the impact should be minimal, they said.

The forecasts

The forecast by Robert Dietz, chief economist at the National Association of Home Builders, was the worst of the bunch. He expects rates to hit 4.8 percent on average by the end of the year and jump to over 5 percent in 2018.

The forecast offered by Frank Nothaft, Dietz’s counterpart at CoreLogic, is a bit less pessimistic. The former chief economist at Freddie Mac sees rates at 4.6 percent by the end of the year.

And though ex-Fannie Mae Chief Economist David Berson didn’t put any numbers to his forecast, he said three adjustments in the Fed Funds rate this year and four or more next year are certain to drive loan costs higher.

But Berson, who now hangs his shingle at insurance provider Nationwide, said rising rates “won’t have much an impact on housing demand” because strong wage gains and job growth “will give people the wherewithal to offset” the higher monthly costs.

Will inventory improve?

Dietz also sees better years ahead, despite higher rates. He is looking for a 10-percent increase in single-family housing starts this year, to 855,000 units, and a 12 percent jump in 2018, to 961,000 units.

Even at that, though, builders won’t be producing houses at what the NAHB considers a “normal” level of 1.34 million units annually. By the end of 2018, projections are that starts will be only at 75 percent of the baseline figure.

Still, builders are an optimistic bunch, to be sure. Maybe more so than real estate agents.

And they think the Trump administration will be good for housing, too.

“If regulations get rolled back as Trump has promised,” said Dietz — who noted that 25 percent of the cost of a new house is attributable to regulation — “builders can reach down” to the lower price ranges.

That would be good news for real estate professionals, whether they ply their trade solely in the new home sector or concentrate on resales. More houses that fit the needs of first-time homebuyers will open the market for everyone.

Lawrence Yun, the National Association of Realtors’ chief economist, is on record as saying that to free up the housing ladder, builders need to put up more houses, especially in the lower price ranges. And at the NAHB convention, Dietz tended to agree. “Clearly that’s a part of the market where we need inventory,” he said.

Indeed, the NAHB economist expects builders to start building again at the lower end, with larger builders leading the way.

To reach that market, smaller builders will concentrate on townhouse construction, which “can be a useful bridge for millennials to transition into homeownership,” he said. (Townhouse construction is already up more than any other part of the single-family sector, according to NAHB’s figures.)

The big 3

The three economists are more concerned about other problems than they are about loan rates. For builders, the big issues are lots, labor and lending.

In the NAHB’s latest survey, 64 percent of builders report land is in either short or very short supply. And unfilled construction jobs are rising, not falling, even as builders put up more houses.

“The industry needs to recruit more workers and get more land into the development pipeline, but that will take time,” Dietz said.

Lenders have been gradually loosening the reigns on acquisition, development and construction loans, but builders would like to see them go further. Right now, smaller firms without the direct access to Wall Street that national outfits enjoy are struggling to find funding to buy land, turn it into building lots and erect houses.

The bright side

On the bright side, though, there’s a rising population entering the key home buying years, ages 25 to 55. Looking out five to 10 years, CoreLogic’s Nothaft said, “the demographics are really positive for housing.”

Berson agreed, saying “Millennials are no less interested in owning a home” than the generations that went before them.

“Now that they have the wherewithal, I expect to see a big increase in buying,” the Nationwide economist added.

Lew Sichelman’s weekly column, “The Housing Scene,” is syndicated to newspapers throughout the country.

Email Lew Sichelman

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