In his remarks in the latest issue of Eye on the Economy, NAHB Chief Economist Robert Dietz provided the following overview of the housing market:
GDP growth continues to be slow and steady. However, despite modest economic growth, the labor market continues to be tight, risking inflation. For this reason, the Federal Reserve will continue to raise the short-term federal funds rate, with the next rate hike expected in June.
Furthermore, after years of quantitative easing (bond purchases intended to lower rates), the Fed will this year begin gradually unwinding its $4.5 trillion balance sheet, $1.8 trillion of which consists of mortgage-backed securities. While mortgage interest rates can expect a small increase due to the change, the impact on housing demand will be minor.
Household debt continues to expand, returning to its pre-recession peak, but the composition of that debt has changed: Compared to the previous cycle high, consumer debt is up 35%, auto loans have grown 44% and student loans have risen 120%. These changes are net drags on housing demand.
And during the first quarter of 2017, multifamily developer sentiment fell below the key breakeven threshold to a level last seen in the final quarter of 2011. This measure is consistent with the NAHB forecast calling for a leveling off of multifamily construction, as more momentum shifts to the single-family market.
For further insights, go to the Eye on Housing blog.