Despite what some indicators may show, the housing market is still red-hot. Single-family starts are still up over last year, with the overall weakening coming from the multi-family segment. We are holding steady with our forecasts for the remainder of 2018.
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Looking at permits on a non-seasonally adjusted basis and mapping to non-seasonally adjusted starts and you find a different story. Permits are showing that Q3 2018 should continue to see strong starts.
We like to look at permits on a non-seasonally adjusted basis to avoid the errors of the X-13 SEATS model. For single-family permits, we are projecting they will regain momentum for the remainder of 2018 and stay well ahead of their 2017 levels.
Q3 started off weak with a weaker-than-expected July starts figure, driven down primarily by a much weaker multi-family segment.
Housing is still going strong and will continue that way for rest of 2018. There is still great potential for growth in housing, but the external influences, tariffs, FED moves, and regulatory restrictions are making us reconsider our 2019 outlook.
See lumber prices, aluminum prices, copper prices and our discussions about labor shortages and the picture on newly constructed home prices is clear. Price go up – Demand go down. It’s a simple economic fact. Add increasing mortgage on top of higher prices and new home sales should be down.
Despite rising prices and other issues related to housing, consumer and builder sentiment are at some of their highest points since 2000. Builders continue to tell us this past year is the best they have ever had, even better than the mid-2000’s and in some areas, they are saying it’s at an unsustainable pace of growth.
Prices for lumber, iron, steel and aluminum were increasing even before tariff threats were looming. Lumber prices, in particular, have soared to the highest levels in the 2000’s. Price increases are being channeled through all those segments of the housing industry that rely on these commodities, like structural framing, windows, doors, cabinets, flooring, plumbing, appliances etc., etc.
As tariffs appeared, those price increases accelerated. Tariffs have a way of doing that.