Builders Start 2018 Filled with Optimism Despite Challenges

Filed in Economics by on January 5, 2018 1 Comment

In the most recent Eye on the Economy newsletter, NAHB Chief Economist Robert Dietz provided the following overview:

frameConfidence among builders at the end of 2017 reached its highest measure in more than 18 years. Much of that optimism is due to tight existing home inventory, a solid economy with low unemployment, and an improving policy environment that offers hope for reduced regulatory burdens.

Census estimates of home construction also helped fuel the rise in builder confidence. By November, single-family starts were up 9% on a year-to-date basis, and sales of new single-family homes had increased 17.5% from the month prior — reaching the fastest sales pace in more than 10 years. Growth for residential construction is expected to continue, as a growing share of new homes are being sold from the “not under construction” class.

However, supply-side headwinds will continue to hamper housing in 2018, as will the tight labor market and rising prices for materials. The Federal Reserve will continue to increase interest rates, which will slowly reduce housing affordability, though that impact will be offset by increases in after-tax income.

Some markets — particularly high-tax/high-cost markets in coastal areas — will experience some negative effects due to tax law changes. But from a national perspective, single-family construction will continue to expand.

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