July 23, 2018

A Mid-year Checkup on the Housing Market

by Anthony Wright

Following the housing market this summer has been a bit like riding a roller coaster.

For instance: The month of May saw housing starts jump to an 11-year high, indicating that the summer busy season for construction was in full swing. The figures outperformed many expectations at the time, with starts totaling 1.35 million versus an expected 1.31 million.
June, meanwhile, saw us come back down to earth. U.S. housing starts plunged 12 percent, marking a nine-month low.

What’s causing the uncertainty? According to a number of builders, rising material costs are a part of the story. Per CNBC:

A survey on Tuesday showed confidence among single-family homebuilders unchanged in July, with builders continuing to be "burdened by rising construction material costs."

The Trump administration in April 2017 imposed anti-subsidy duties on imports of Canadian softwood lumber, which builders say have boosted the price of a new single-family home. This, together with a lack of land and labor have worsened an acute shortage of homes for sale, hobbling the housing market.

We’ve seen all of this taking shape in the fenestration industry. My colleague Joe Erb recently wrote about the ongoing trade and tariff commotion leading to rising prices in raw materials and general uncertainty in the commercial market, and the residential space is feeling some of that squeeze as well.

Still, the June tumble for housing starts was unexpected for many industry watchers, even with the material cost challenges well known. Home sales also fell unexpectedly, attributable to a shortage in properties on the market and house prices reaching a record high, according to Reuters. “Sales are being stymied by an acute shortage of homes on the market,” the news agency writes. “Rising building materials costs as well as shortages of land and labor have left builders unable to bridge the inventory gap, pushing up house prices.”

Unpredictability seems to be status quo for the housing market this year, and unpredictability can lead to caution. But the overall U.S. economy remains in great shape, and many in the fenestration industry are expecting continued growth throughout the remainder of the year.
What does the immediate future hold? We’ll have to wait and see, and keep a close watch on the housing market in the meantime. But fenestration professionals looking to drive their businesses forward should feel safe making continued investment—in equipment, technology and the workforce—to succeed in a growing market.

Questions or comments? Contact me directly at Anthony.Wright@Quanex.com

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Posted: July 23, 2018 by Anthony Wright Filed under: housing, market, trends