Economic Panel Predicts Housing Will Continue to Gain Ground in 2018

January 10th, 2018 by Editor

The newly enacted tax law will create a more favorable tax climate for the business community, which should spur job and economic growth and keep single-family housing production on a gradual upward trajectory in 2018, according to economists speaking at the NAHB International Builders’ Show in Orlando, Fla., yesterday.

“We expect that tax reform will boost GDP growth to 2.6 percent in 2018, and this added economic activity will also bode well for housing, although there will be some transition effects in high-tax jurisdictions,” said NAHB chief economist Robert Dietz. “Ongoing job creation, expected wage increases and tight existing home inventory will also boost the housing market in the year ahead.”

However, according to the panel, builders will continue to deal with ongoing supply-side headwinds this year that will dampen more robust growth. These factors include an increasing number of unfilled construction jobs, a shortage of buildable lots and a slow growth in acquisition, development and construction loan activity that is failing to keep pace with rising demand.

In addition, regulatory costs stemming from building codes, land use, environmental and other rules have jumped 29 percent in the past five years, and this has had a significant impact on housing affordability. The ongoing U.S.-Canada softwood lumber trade dispute is further exacerbating the situation, as the price of softwood lumber has increased 20 percent from a year ago, according to the speakers.

As the economy continues to strengthen, NAHB expects 30-year fixed-rate mortgages will average 4.31 percent in 2018 and 4.82 percent in 2019.

NAHB is projecting 1.21 million total housing starts in 2017 and expects overall production to grow an additional 2.7 percent this year to 1.25 million units.

Single-family starts are expected to rise 5 percent in 2018 to 893,000 units and increase an additional 5 percent to 940,000 next year.

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