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The Builders’ Dilemma: Affordability Impacting Home Construction

A new report from the National Association of Homebuilders is predicting that single-family home production will be relatively flat in 2019. Greg Ugalde, NAHB Chairman, said, “Looking back, the December drop in housing production correlated with the peak increase in mortgage rates and a corresponding decline in builder sentiment.”

Possibly due to the government shutdown, December had a combined decrease of 11.2 percent (single-family and multifamily) to a seasonally adjusted annual rate of 1.08 million units. Ugalde added, “During that time, builders adopted a cautious wait-and-see approach as demonstrated in the rise of single-family and multifamily units that were permitted but not under construction.”

Digging deeper, overall permits—an indicator of future housing production—slightly increased from 0.3 percent in December to a seasonally adjusted annual rate of 1.33 million. Of this, single-family permits fell 2.2 percent while multifamily permits increased 4.9 percent. In 2018, single-family permits increased 4 percent.

In December, the regional combined single-family and multifamily housing starts were unchanged in the Northeast. However, in the West starts fell 26.3 percent,13.2 percent in the Midwest and 6 percent in the South. Overall permit issuance in December rose 17.1 percent in the West, while permits were down 6 percent in the Northeast, 17.6 percent in the Midwest and 2 percent in the South.

What does this suggest for 2019 according to the analysis?  NAHB Chief Economist Robert Dietz said, “Looking ahead, we expect single-family production will be relatively flat in 2019 and multifamily starts will level off as well.” He added, “The biggest challenge facing builders this year will be ongoing housing affordability concerns as they continue to grapple with a shortage of construction workers, a lack of buildable lots and excessive regulatory burdens.”

Read the full report here.

About Author: Stephanie Bacot

Stephanie Bacot is an experienced multimedia writer having created content for print, web, television, and more. She is the past producer of BIZTV, a national television network for businesses and entrepreneurs that reached more than 200,000 professionals. She has more than 15 years’ experience in healthcare marketing and was an advertising exec for Healthcare Journal of Baton Rouge, a trade publication focused on the healthcare industry, as well as the marketing director for a $5 million surgery center. Bacot is a graduate of Louisiana State University with a degree in Marketing and Communications. She resides in Dallas when she’s not pursuing her love of travel.
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