Economic Slowdown Ahead

Transcription

1 Economic Slowdown Ahead NAHB Meeting of the Members February 20, 2019 Robert Dietz, Ph.D. NAHB Chief Economist

2 GDP Growth Economic slowdown approaching 10% 8% 6% Q/Q Percent Change, SAAR Annual Growth LT avg ( 58-07) 3.4% % % 2018 f 2.9% 2019 f 2.5% 2020 f 1.3% 4% 2% 0% -2% -4% -6% -8% -10% Source: U.S. Bureau of Economic Analysis (BEA) and NAHB forecast.

3 Did the Fed Back Down?

4 Federal Reserve - Economic Goals Congress directed the Fed to conduct monetary policy to support three specific goals: maximum sustainable employment stable prices moderate long-term interest rates These goals are sometimes referred to as the Fed's mandate.

5 Tight Labor Market Lack of labor represents a macro risk Percent, SA 5.0% Percent, SA 12% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Unemployment Rate Job Openings Rate % 10% 9% 8% 7% 6% 5% 4% 3% 2% Source: U.S. Bureau of Labor Statistics (BLS) and NAHB forecast.

6 Consumer and Core Inflation 10 8 Percent, SAAR 6 CPI Core PCE Source: U.S. Bureau of Labor Statistics (BLS); U.S. Bureau of Economic Analysis (BEA) and NAHB forecast.

7 18% The Great Moderation The Decline of Long-Term Rates 16% 14% 12% 10-Year Treasury Rate 10% 8% 6% 2.8% December % 2% 1.5% July % Source: U.S. Board of Governors of the Federal Reserve System (FRB).

8 NAHB FedCast Increase fed funds rate to 2.75% in the first half of the year Powell pause during much of 2019 Possibility of final rate hike during 4 th quarter 2019 Slowing of sales of Treasury bond holdings, ongoing drawdown of MBS

9 Fed Funds Rate 10% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 10-Year Treasury Federal Funds Rate (Top Range) 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 0% Source: U.S. Board of Governors of the Federal Reserve System (FRB).

10 30-Year Fixed Rate Mortgage and 10-Year Treasury Some increases ahead but nearing peak rates for the cycle 12% 12% 10% 30-Year Fixed Rate Mortgage October 31, % 8% 8% 6% 6% 4% 10-Year Treasury 4% 2% 2% 0% % Source: Federal Reserve and Freddie Mac data and NAHB forecast.

11 Housing Affordability NAHB/Wells Fargo HOI National Source: NAHB/Wells Fargo Housing Opportunity Index (HOI).

12 The Geography of Housing Affordability-NAHB/Wells Fargo HOI Coastal markets least affordable Source: NAHB/Wells Fargo Housing Opportunity Index (HOI).

13 New Construction Housing Affordability Lower Approximate 20 point difference between all sales and new sales Percentage Regular HOI HOI - New Construction Only 03/16 06/16 09/16 12/16 03/17 06/17 09/17 12/17 03/18 06/18 09/18 Source: NAHB/Wells Fargo Housing Opportunity Index (HOI).

14 Housing Forecast

15 Existing Single-Family Home Sales 7 Million Units, SAAR Source: National Association of Realtors (NAR) and NAHB forecast.

16 Labor Labor shortage continued through % 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% Job openings rate - Construction 12-month moving average % Source: U.S. Bureau of Labor Statistics (BLS). -

17 NAHB/Wells Fargo Housing Market Index Lower interest rates stabilize builder confidence 80 Index Thousands, SAAR 2, HMI 1, Single-Family Starts 58 1,600 1,400 1,200 1, Source: Census Bureau and NAHB/Wells Fargo HMI survey.

18 Single-Family Starts Limited growth as economy slows 2,000 1,800 1,600 1,400 1,200 1, Thousands of units, SAAR 80% fall Trough to Current: Mar 09 = 353,000 Nov 18 = 824, % Year Units % Change , ,000 10% ,000 9% 2018 f 876,000 3% 2019 f 894,000 2% 2020 f 928,000 4% Source: U.S. Census Bureau (BOC) and NAHB forecast.

19 Growth in Single-Family Permits November 2018 YTD vs. November 2017 YTD Rank No Changes Decline Growth rate < U.S. Growth rate U.S. (5.1%) Source: U.S. Census Bureau (BOC).

20 New NAHB Leading Markets Index New economic geography measure of building conditions First index metric is metro areas third quarter data Smaller metro areas core counties (29% of single-family permits) Smaller towns like Xenia, Ohio and Darlington, South Carolina 9.8% annual growth rate, 7.4% year-over-year Large metro areas core counties (18% share) Columbus, Ohio and Orange County, California 6.5% annual growth rate, 6.8% year-over-year Large metro areas suburban counties (26% share) Fairfax, Virginia 4.1% annual growth rate, 3.2% year-over-year Smaller metro, outlying areas (8% market share) Rural areas near small towns 2.7% growth rate, -2.4% year-over-year Source: NAHB Analysis of Census data (Building Permits and ACS).

21 Typical New Home Size Decline after market shift 2600 Square Feet SF Starts: Median Floor Area SF Starts: Median 1 Year MA Source: U.S. Census Bureau (BOC).

22 Townhouse Market Expanding 24% annualized growth rate Thousands, NSA 70 SF Starts: Attached 60 Townhouse Share: 1-Year Moving Average 16% 14% 50 12% % 8% 6% 4% 2% % Source: U.S. Census Bureau (BOC).

23 Multifamily Housing Starts Leveling off Thousands of units, SAAR Avg=344,000 Year Units % Change , ,000 0% ,000-9% 2018 f 386,000 8% 2019 f 379,000-2% 2020 f 384,000 1% Trough to Current: 4 th Q 09 = 82,000 3 rd Q 18 = 357, % 76% fall Source: U.S. Census Bureau (BOC) and NAHB forecast.

24 Residential Remodeling Growth ahead but softening Billions, SAAR Year Percent Change % % 2018 f 10% 2019 f 4% 2020 f 2% Actual Adjusted Source: U.S. Census Bureau (BOC) and NAHB forecast.

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