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Housing Recedes in Face of Headwinds

The nation’s housing market, midway through 2019, continues to be characterized by positive growth forecasts, as well as a lingering variety of headwinds, industry analysts report. Among the key statistics and forecasts released in recent weeks by government agencies, research firms and industry-related trade associations are the following:

HOUSING STARTS

Excessive regulations, a lack of buildable lots and ongoing labor shortages are among the factors negatively affecting the housing market, although recent declines in mortgage rates “should help in future months,” the National Home Builders Association said last month. Single-family housing starts through the first quarter of 2019 are off about 5% from a year ago, with weakness mainly in the Midwest and West, according to the NAHB (see related graph above). “Builders report solid demand for new single-family homes, but they’re also grappling with affordability concerns stemming from a chronic shortage of construction workers and buildable lots,” said NAHB Chairman Greg Ugalde. “Ongoing job growth, favorable demographics and a low-interest-rate environment will help to modestly spark growth,” added NAHB Chief Economist Robert Dietz. “However, supply-side headwinds will limit more robust growth,” he cautioned.

EXISTING-HOME SALES

Current sales activity for existing homes is “underperforming in relation to the strength in the jobs markets” – in part because the impact of lower mortgage rates “has not yet been fully realized,” the chief economist for the Washington, DC-based National Association of Realtors said last month. According to Lawrence Yun, the NAR was not surprised to see the recent retreat in existing-home sales, which were most recently pegged at a seasonally adjusted annual rate of 5.21 million units. Sales as a whole are down 5.4% from their pace of a year ago, the NAR said, adding that a sustained, steady gain in home sales can occur only “when home price appreciation grows at roughly the same pace as wage growth.”

RESIDENTIAL REMODELING

Residential remodeling is reportedly “strong” in many parts of the country due to insufficient home construction and an aging housing stock, although “it can be difficult to find skilled labor” for remodeling projects, the National Association of Home Builders reported last month. According to the latest “Remodeling Market Index” (RMI) issued by the NAHB, remodeling activity, while expanding at modest rates, should see slowing growth, given declining home-price appreciation and existing-home sales volume combined with rising construction costs (see related sidebar). Remodeling market activity, along with remodeler confidence, has remained in positive territory since the second quarter of 2013, according to the NAHB.

APPLIANCE SHIPMENTS

Domestic shipments of major home appliances, keyed by declines in nearly all major product categories, fell in March compared to the same month in 2018, according to the Association of Home Appliance Manufacturers. The Washington, DC-based AHAM reported last month that March appliance shipments totaled 7.96 million units, down 4.1% from the 8.30 million units shipped in March 2018. Year-to-date appliance shipments through March were down 4.3% from the same three-month period in 2018, AHAM said.

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