Despite a reported increase in new home construction in the United States over the past few years, new home completions seem to always fall short of forecasts. This has left industry experts wondering why estimations continue to miss the mark, and what can be done to ensure projections become more accurate. With a growing demand for affordable and available houses in the current market, accurately forecasting new home completions is more important than ever. In this article, we’ll discuss why forecasters are constantly underestimating new home completions, and what can be done to improve accuracy moving forward.
A property investor in London shared his success story with me, stating that he believed in going against the consensus forecasts to avoid commodity information that would lead to competition and lower margins. Instead, he sought out contrarian insights that were supported by data and logic, which he believed had a high probability of being correct. Economist Conall MacCoille observed that the property industry consistently underestimated housing output in Ireland, even in short forecasting horizons, and he attributed the cause to a commercial bias in property research. State bodies also had an indifferent record in forecasting housing delivery, which led to a debate between commercial bias and other factors. In spring, housing delivery forecasts for the year ahead emerged, and the Central Bank, Goodbody Stockbrokers, the ESRI, and the Banking and Payments Federation all predicted that 27,000 units would be built, which was 10% lower than last year and 7% below the Housing For All target of 29,000. However, due to the relaxation of Covid restrictions triggering an increase in commencements and a swollen pipeline of properties under construction, the author expects housing completions in Dublin to rise significantly this year, potentially reaching around 30,000 units. While the 2024 outlook is ambiguous, increased activity in forward-looking indicators suggests the potential for continued growth in the housing market. This has important implications for policymakers who may face pressure for further market interventions later in the year.
As the real estate industry continues to grow and evolve, accurate forecasting of new home completions becomes increasingly essential. The repeated underestimation of these completions can lead to significant ramifications on the housing market, from lack of inventory to rising prices. It is clear that we need to take a more proactive approach to forecasting, utilizing relevant data and industry expertise to ensure accuracy. Only then can we ensure that the housing market remains stable and accessible for all, regardless of their income or background. By recognizing the importance of accurate forecasting, we can work towards a more equitable and sustainable housing market for all.
