Morgan Stanley predicts a jump in starts

Looking ahead to 2016, a Morgan Stanley analyst believes household formations will push total housing starts to the neighborhood of 1.3 million – up about 18% from 2015’s total.

Egan revealed his forecast during a recent webinar hosted by Morgan Stanley and HomeSphere. Egan’s title includes that of co-head of US Housing Strategy for Morgan Stanley.

What’s not to like about a near 20%-growth forecast? In an industry where single-family starts are the bread and butter, starts are expected to be heavy on the multi-family side.

Historically, single-family starts have accounted for around 80% of all housing starts. Last year, the share slipped down to about 65%, and that ratio is likely to continue.

“Looking at 2016, continued household formations are going to drive the need for higher housing starts,” Egan said. “And we believe they'll approach 1.3 million. However we believe the rate will  be skewed toward multi family, and project the ratio to remain right around 35% multi-family, 65% single-family.”

Morgan Stanley also anticipates the following in 2016:

• Household formations of 1.25 million to 1.3 million;

• Home price appreciation of positive 3%;

• New home sales in the 575,000 to 600,000 range

• Existing home sales of 5.25 million to 5.5 million.