Low Inventory Intensifies Housing Demand in 2018

Filed in Business Management, Economics by on March 29, 2018 0 Comments

NAHB Chief Economist Robert Dietz provided this housing industry overview in the bi-weekly newsletter Eye on the Economy

A lack of existing home inventory continues to drive growth for residential construction and sustain strong home-builder confidence — now hovering near a two-decade high. Current inventory levels represent only a 3.4 months’ supply, which is pushing up prices for homes and intensifying the demand for construction activity.

However, limited access to labor and rising prices for building materials continue to inhibit the expansion of construction. While single-family starts increased at a modest 2.9% rate, total housing starts declined by 7% due to a significant (26%) decline in the volatile multifamily market.

As an indication that macroeconomic conditions remain promising, the Federal Reserve recently increased the federal funds rate for the first time in 2018 to a range of 1.5% to 1.75%. We expect as many as three additional rate hikes later this year, followed by three more in 2019.

Federal Reserve Chair Jay Powell noted that expectations for economic growth have strengthened in recent months and the unemployment rate is expected to decline — the downside of which could mean even tighter access to labor for builders. There are roughly 250,000 unfilled positions in the construction sector, which is near a post-recession high.

The new monetary policy chief also said that while asset prices for equity and commercial real estate are elevated, the gains in housing prices are due to other factors, which is consistent with NAHB analysis.

Go to Eye On Housing for more.

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