Trade Concerns Dampen Positive Housing Demand

Filed in Business Management, Economics by on April 16, 2018 0 Comments

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

Worries over trade-related impacts on the U.S. economy have proliferated throughout the housing industry. Most notably, tariffs on Canadian softwood lumber have triggered significant jumps in lumber prices — increasing 53% since the start of 2016.

And lumber isn’t alone: Concrete prices grew 3.3% in March and steel prices rose 7.2% during the first quarter of 2018. The tariffs on building materials will exacerbate price concerns, but they also pose a macroeconomic risk due to possible tit-for-tat retaliatory tariffs on U.S. exports.

Trade concerns are escalating as the Federal Reserve continues to tighten monetary policy. The Fed’s stance is shaped, in part, by a tight labor market. The low unemployment rate (currently 4.1%) will make it increasingly difficult and costly to attract additional workers, an issue the construction industry has faced for the last few years.

One bit of good news: Since late 2015, there have been noticeable gains in the prime working age population (age 25-54), which now has a participation rate near 82%.

Despite these headwinds, the residential construction labor force has increased by 144,200 over the last 12 months, and looks to expand further in 2018 as housing demand remains solid. Consumer confidence is growing — reaching an 18-year high in February — incomes are rising, and tax cuts are expected to boost budgets for approximately 80% of households.

For more, go to eyeonhousing.org.

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