Unfortunately, while the rest of the capital markets appear to be moving forward as the extended bull market continues its upward trajectory, it has left the housing sector in the rearview mirror as rates continue to rise and affordability remains low. Despite this, economic models at the NAHB are showing that home builders can weather the storm of higher interest rates.
“NAHB’s forecast model suggests single-family construction will continue to expand despite this change in conditions,” added Dietz. “The top reason for this expectation is the fact that there is such a large degree of underbuilding in single-family markets, with just over 900,000 single-family starts expected this year, compared with the 1.2 million we believe the market could absorb.”
Dietz did make a call upon lawmakers to take notice of the current economic conditions in the housing market, particularly with respect to affordability. With the capital markets relatively focused on the current bull run in the stock market and trade wars, it would be careless economic policy to ignore the housing market as it comprises 15-18% of the gross domestic product.
“For policymakers and community leaders concerned about affordability declining due to macroeconomic conditions, there’s no better time to try to reduce regulatory costs associated with home construction,” said Dietz. “Ultimately, additional supply will help reduce the cost of the American dream.”
In the meantime, traders can keep NAIL on their radar when the housing market does indeed turn around.
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