Breaking Down the 2019 MetroStudy Housing Outlook

The NAHB International Builders’ Show (IBS), the largest light-construction building industry trade show in the United States, hosts more than 100,000 attendees each year. The Interrupt team always participates in the annual not-to-miss session of the 2019 National Housing Forecast. Presented by Metrostudy, Chief Economist Mark Boud focused on economic trends currently affecting the housing industry as well as likely influences to come.

Below are some general takeaways by the Interrupt team that we believe our clients and others in the residential building industry will find valuable. Also included are housing forecasts and the impact U.S. government policy will continue to have on the economy and, in turn, the housing market.

key housing forecast predictions

  • The housing market will remain significantly under-supplied with the highest pent-up demand in the lower to mid-level pricing categories
  • The housing market will become increasingly overvalued, but the risk of a price collapse is small due to under-supply
  • A surge in the remodeling/renovation market will continue for the next 24 months
  • Interest rates will rise gradually yet erratically over next 24 months. Homeowners will think twice about financing a new home at 5.8% when their current mortgage sits at 4%
  • Housing starts will plateau at 1.2 million through 2023 with multifamily starts growing from 33% to 37% of the market

policy’s impact on the housing market

  • United States–Mexico–Canada Agreement (USMCA) - USMCA is on deck to replace NAFTA, which has been in place since 1994. The agreement was signed by all three leaders, but it still needs to be ratified by each nation. Some car part and automobile manufacturing jobs are expected to return to the U.S. under USMCA, creating more jobs in the short term. However, the likely long-term effects include higher prices, higher costs, and inflation.
  • U.S. Immigration Policies - New immigration policies have slowed both illegal AND legal immigration, resulting in an even tighter labor market. Fewer immigrant workers, combined with an unemployment rate below 4%, could create a serious labor shortage. The shortage would affect multiple facets of the building industry. Illegal immigrants currently account for 14% of construction labor, while the tightening of immigration policies has already created a shortage of engineers.
  • U.S. Infrastructure Policy - One third of U.S. roads and bridges are in disrepair and traffic management needs a complete overhaul. With the slowest internet system of any developed country, America trails other industrial nations not just in physical infrastructure but also in technological infrastructure. The administration has promised a $1 trillion plan, but a plan has yet to be sent to Congress.
  • Housing Market Tax Cuts - Although tax cuts were in the trillions, they will not help the majority of U.S. home buyers. With those making over $500K per year receiving the largest cuts, the ultra-prime housing market (homes $25M+) already jumped 15% in 2018 and will see the biggest bump. The minimal tax cut for the middle class will not benefit the low to mid-range housing market.
  • U.S. National Debt - Recent figures estimate the national debt to be more than $22 trillion. As the debt continues to climb, it will be necessary to increase interest spending while decreasing spending on development. We will see a higher risk of inflation, reduced economic growth, and possible financial collapse.

As always, we’re definitely keeping a close eye on these predictions and the impact they will have on the ever-evolving housing market.

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