I recently presented a 30-minute investor-oriented Housing Market Outlook webinar for Bloomberg’s 300,000+ subscribers. You can access the webinar slides here. For our clients who have a Bloomberg terminal, we post our research on the ticker JBRE.
The future is always uncertain, but investors have to have a view. Here is our summary of the most likely scenario:
- Expect mortgage rates to rise to 5.1%. The bond market is telling us that we should expect mortgage rates to gradually rise to 5.1% by 2021, so we are going with what the bond market says.
- Look elsewhere for recession risk. Housing is very unlikely to cause a downturn, with historically low single-family construction and tight mortgage documentation. Home prices should fall if and when another sector of the economy causes a recession. Here is a summary of a report we did 15 months ago on where we believe the risks lie.
- Rates matter more for stock prices than for new home sales, both according to 40+ years of history and 2018 new home sales, which are up year over year. The economy matters far more than rates.
- The president will control mortgage policy. Presidential appointees now control policy on 71% of all mortgage originations, with President Trump able to replace the GSE regulator overseeing 46% of all mortgages when Mel Watt’s term expires in January. The recent overturn of portions of Dodd-Frank gives an indication of where policy is heading.
- Huge regional differences. For the ultimate difference in performance during the recovery, compare and contrast the Nashville and Chicago metro areas. 15 of the top 33 markets have now reached the mature stage of the cycle.
- 6.8% bull’s-eye building materials forecast. Our building materials spending forecast, which is the only one to include multifamily and rental homes, calls for solid growth the next two years. We project that slightly smaller homes, a slowing economy, and a pivot to more DIY projects will slow the robust growth rate in 2020 and later. Our forecasts by product and region provide better insight for specific companies.
I ended the webinar with an invitation to “end the guesswork.” For far less than the cost of an employee, we provide our clients with housing market insight gained from on-the-ground research and a diverse set of clientele. We can’t predict the future, but we can certainly help executives make decisions with far more confidence than they do today.
