Housing the best performing sector of economy as fears mount over downturn
Rising building costs, demand and the need for larger homes during the coronavirus pandemic may impact growth
The National Association of Home Builders CEO Jerry Howard said Wednesday that although the housing market is currently the “best performing segment of the economy," continuing regulation of the industry makes builders “really worried” about a potential downturn.
During an appearance on “Varney & Co”, Howard asserted that regulation, inflation, and an inability to keep up with demand poses a real threat to the industry as building season approaches in early summer.
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Additionally, rising prices of essential building materials have added unintended costs for customers attempting to stay within fixed construction budgets.
“The lumber prices are so unstable,” Howard said. “It’s so consistently rising that they have to put ‘escalator clauses’ in the contract and the customers have the right to walk away – and now they’re starting to.”
Despite all of these factors, the average size of homes is actually increasing. After 2010, the size of homes began to decrease, however, the pandemic has necessitated in-home exercise facilities and work offices for many, thus increasing the size and cost for those looking to buy a home.
Housing has been one of the top performers this year even as the overall economy has been negatively impacted by the coronavirus. Record-low mortgage rates and the desire of many people to move to larger homes during the extended stay-at-home period have fueled demand.
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The National Associated of Home Builders/Wells Fargo housing index came in at 74 this month, just one point lower than in January. This builders’ confidence survey for the past three months has been at the highest levels since late 2017.
After being a drag on economic activity for more than a year, home building rebounded, encouraged by interest rates cut by the Federal Reserve and unemployment that is near a half-century low.
The Associated Press contributed to this report.