Economists expect tax reforms to boost housing says NAHB panel

by Steve Randall10 Jan 2018
Despite the impact on homebuyers of the tax reforms, economists attending this week’s NAHB International Builders’ Show in Florida are confident it will benefit the housing market.

That’s because they predict that the positive impact for businesses will mean a boost for the economy and for jobs, handing the housing market new entrants and confident consumers.

“We expect that tax reform will boost GDP growth to 2.6% 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.”

Not that it will be an easy time ahead for builders with shortages of labor and lots still challenging their ability to meet demand.

What economists expect
The panel forecast that there will be 1.21 million housing starts with production up 2.7% year-over-year to 1.25 million units. Single-family starts will gain 5% this year and in 2019 to 893,000 and 940,000 respectively. Multifamily starts will decline 1.6% to 354,000 this year (from 360,000 projected for 2017).

Mortgage rates are expected to average 4.31% for a 30-year FRM, rising to 4.82% in 2019.

“Mortgage rates are expected to rise from 4 percent to 4.5 percent by the end of year,” said David Berson, senior vice president and chief economist at Nationwide Insurance “However, housing demand remains strong and wages are solid, and this will more than offset the negative effects from rising rates.”

CoreLogic’s chief economist Frank Nothaft agrees on the rise for mortgage rates and highlighted affordability challenges.

“Higher rates are not just a gradual erosion of affordability, but also impact owner mobility,” said Nothaft. “That has implications on the overall inventory for sale. Supply has been tight and for-sale inventory will continue to remain tight.”

More market update:

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