National Housing Trends - HBA Triangle Update
As the year winds to a close, now is a great time to reflect on both national housing trends and just what made the Raleigh-Durham housing market tick during the year. Fuller Land & Development’s President, Jim Anderson, and Vice President, Jackie Elek, recently attended a conference hosted by industry leaders and real estate professionals, courtesy of both Durham Orange Chatham Homebuilders Association and the Raleigh/Wake County Homebuilders Association. This conference provided both data and insight into the market’s behavior this past year, while also affording them a unique perspective on the road that lies ahead.
We’ll break the conference up into three parts (National Housing Trends, Triangle Housing, and What 2019 Brings) in three different blogs, over the next few weeks. Here is the first:
National Housing Trends
The national housing trend for home building for 2018 can perhaps be summed up in a simple phrase: slowing, but not “slow”. In other words, the market seems to be plateauing at a healthy level. Here is the breakdown:
National Economy: Nationally, 2018 continued both the economic and employment “bull” run we’ve been witnessing for the past two years. The GDP grew from 2.2% in 2017 to 3.0% in 2018, partially due to the tax reform passing earlier this year.
Labor Shortage: Unemployment also continues to drop which, while good for the overall economy, is proving troublesome for the homebuilding community. Construction managers are having more difficulty “catching up” with the additional housing demand, since fewer members of our younger generations are backfilling construction workers who may have retired or moved into other fields during the recession.
Raw Costs are Increasing: The cost of building materials increased dramatically in 2018, led by both tariff increases and lumber shortages. Beyond the cost of materials, increasing regulatory costs have led to further increases in the overall cost of a home. We estimate that the cost to build a standard home, including land, materials, labor, and permits fees has increased at least 20% since the beginning of this economic cycle, outpacing the same period price increases by approximately 10%.
Home Ownership is Desirable Again: Demand for homeownership for Millennials continues to steadily climb. They may be priced out of some single family detached communities, but for the most part they are still able to purchase affordable townhomes in “A” locations. We expect townhomes to become a larger part of the housing equation, for both younger and older generations, based on their increased affordability.
Interest Rates: Even though mortgage rates remain near historic lows, they have increased in 2018 and are expected to continue to rise year over year for the foreseeable future. This will either serve to increase homeowners’ payments, or decrease the amount of home a person can buy for the same payment. It may also serve to prompt some “fence-sitters” to move forward on their home purchase quickly.
More National Housing Trends?
If you have thoughts on the topic, shoot us a quick email and we'll take them into consideration when updating the “National Housing Trends” section! Next week, we’ll drill down on the Triangle Housing Market specifically.
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