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A recent article indicated “Homebuilder sentiment cools in January from 18-year high”. Sounds a little ominous. Like, maybe the jig is up, things are taking a turn for the worse. That couldn’t be further from the truth.
Yes, homebuilder sentiment is down from its highest level in 18 years, but by a mere 2 points.
The Housing Market Index fell to 72 (matching the estimate) from December’s 74 that was the best since 1999. The measure of the six-month sales outlook slipped only 1 point to 78 from a 12-year high of 79. The current sales gauge for single-family homes ‘cooled’ to 79 from 80. Cooled? Really?
By all indices, the sentiment is still very positive. Reports indicate that residential construction will climb on recent growth, as a solid job market, relatively low mortgage costs, and rising confidence help to increase housing demand. Sounds good to me.
Although the recent tax changes may (and I emphasize ‘may’) put a slight damper on housing (I don’t believe so), they also will put more money in many consumer’s pockets. This may spur some interest in homeownership.
The tax changes also benefit businesses. With their tax burden decreased, builders and their sub-contractors can produce more units for less, bringing more new homes to market, and putting some downward pressure on rising home prices.
This bodes well for housing and related home financing. According to Robert Dietz, chief economist at NAHB, “Housing demand should grow in 2018. As the overall economy strengthens, owner-occupied household formation increases and the supply of existing home inventory tightens, [builders] can expect the single-family housing market to make further gains this year.”
With rates remaining relatively low, there will be financing opportunities in new construction which should lead to opportunities in existing home financing as well. Some refinance opportunities will hang around and HELOC’s may come back into play.
Don’t get all hung up on the headlines, be sure to read the full article an see the big picture. Although things may be a little tougher in 2018, it ain’t all bad news. Remember, the new tax laws will benefit lenders as well.
Lenders that right size and operate efficiently through the use of technology and outsourcing can reduce their costs to produce. That’s the key, so even if production falls off in 2018, you’ll be able to weather the storm.
The headline could just as easily read “Homebuilder sentiment remains strong in 2018.” And, that’s the truth.
