Housing Flat Amid Affordability Woes
Affordability concerns and other factors, including labor shortages and tariff-related price increases, continue to place restraints on growth in the housing and remodeling sectors, according to market analysts. Among the key statistics and forecasts released in recent weeks by government agencies, research firms and industry-related trade associations were the following:
HOUSING STARTS & NEW-HOME SALES
Affordability concerns throughout the country, especially in high-cost markets, continue to put a damper on housing starts and new-home sales, and will likely result in a flat year for single-family housing, the National Association of Home Builders said last month. “Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers,” said NAHB Chief Economist Robert Dietz. At the same time, Dietz said, builders continue to grapple with excessive regulations, a shortage of lots and a lack of skilled labor. Also serving to depress market growth are rising development and construction costs, as well as ongoing concerns over the impact of tariffs on construction-material prices, the NAHB said.
Annual gains in homeowner spending on improvements are expected to moderate across more than half the nation’s largest metro markets this year, according to projections released by the Joint Center for Housing Studies of Harvard University. While no major metros are projected to see spending decline, Joint Center researchers forecast that the pace of spending by homeowners will slow this year in 29 of the 49 major metros tracked. Despite the deceleration, however, remodeling gains “should remain strong and even accelerate through year-end in areas where remodeling permitting, house prices and homebuilding have picked up,” Harvard analysts said. The strongest growth is expected to be among metros in the West, analysts added.
With consumer confidence on the rise, the market for existing-home sales should improve in the months ahead, the National Association of Realtors predicted last month. According to Lawrence Yun, chief economist for the Washington, DC-based NAR, lower-than-usual mortgage rates are creating “extremely attractive conditions” for prospective home buyers and have resulted in an increase in pending sales. Whether or not additional interest-rate cuts are implemented, “job creation and a rise in inventory will drive more buyers to enter the market,” Yun predicted.
Domestic shipments of major home appliances rose in May compared to the same month in 2018, although year-to-date shipments lagged those of a year ago, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that May appliance shipments totaled 6.93 million units, up 2.7% from the 6.75 million units shipped in May 2018. Despite the gain, year-to-date shipments through May were off 5.1% from the same five-month period a year ago, AHAM said, noting that declines were posted in shipments of cooking, kitchen clean-up and refrigeration products.