Economy Continues to Grow at a Brisk Pace

Filed in Economics by on November 9, 2018 0 Comments

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

business graph of rising numbersWhile the cost of mortgage financing and its impact on housing affordability is giving many prospective home buyers pause, the overall state of the economy remains positive.

Following a 4.2% growth rate in the second quarter, third quarter real GDP growth came in at an annualized rate of 3.5%. This was the strongest two-quarter performance in four years. And in October, the economy created 250,000 jobs, beating expectations and leaving the unemployment rate at a near 50-year low of 3.7%.

More growth and less slack in the economy means higher interest rates. Increases in the 10-year Treasury rate have pushed mortgage interest rates up in recent months. In September, the average rate on 30-year mortgages for new homes increased to 4.64%, up from approximately 4% over the last 12 months.

While higher rates have cooled home sales, home price appreciation remains solid, increasing at a 5.8% year-over-year basis according to the Case Shiller Index in August.

However, for new home construction, supply-side analysis indicates ongoing cost and input availability concerns that will exacerbate housing affordability. NAHB survey data revealed that 65% of builders consider lot supplies to be “low” or “very low” in their market, up from 42% six years ago. And while builders and remodelers added 16,600 jobs in October (143,500 total over the last year), the labor shortage persists as there were 278,000 unfilled construction jobs in September.

For more, go to the Eye On Housing blog.

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