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Predicting the Housing Market in Q3 and Beyond

The headwinds that troubled the housing market for most of the first half of 2018 are likely to continue into the third quarter, according to an analysis by Metrostudy [1].

During a webcast on Wednesday, Mark Boud, Chief Economist at Metrostudy gave an overview on the state of the housing market in Q3 and beyond.

Speaking of the rising impact of tariffs on the construction industry, Boud said that the rising tariffs were leading to increasing in construction timelines. "Overall trade used to be about 10 percent of GDP, but now it is closer to 30 percent so over the decade the impact of trade and the impact of tariffs on trade tend to increase as our reliance on trade increases. A lot of these tariffs were directed towards the construction industry," Boyd said. "Tariffs hurt the economy, especially the new home industry."

Outlining macro trends that were already impacting or likely to impact the housing industry, Boud said that while tax reform had hurt some of the high priced markets, rising inflation was another concern that was likely to slow economic growth. However, he pointed out to the strong jobs data that remained solid in August and said that was likely to continue through the year.'

While he predicted that national debt would slow economic growth, Boud said, "Rising mortgage rates are just beginning and inflationary pressures are slowly building. Overall we are in the bottom of the seventh inning of a challenging and rewarding housing market in an environment of under supply and increasing costs."

Giving the current comparison between housing inventory and annual closings by price range, Boud said that the overall percentage share of housing inventory was far below closings in percentage terms at all price ranges below $200,000. "As soon as it hits $400,000 the inventory is increasing and especially in the $800,000 range it far outstrips the closing," Boud said.

Some of the other factors, that he predicted would impact housing in the coming months also included the fact that the national housing market would become increasingly overvalued. However, "the risk of a price collapse is small due to under supply," Boud projected. "The surgeĀ in remodeling/renovation will continue."

Click here to view [2] the complete recording of the webinar.