There is good news for the U.S. housing market that saw a rough end to 2018. Domestic housing starts rose 5.7 percent to 1.235 million in April, while permits grew at a more modest 0.5 percent to 1.296 million. The growth was primarily driven in the Northeast and Midwest—drying out after a wet and soggy start to the 2019 building season—with month-over-month growth of 84.6 percent and 42 percent, respectively. The South and West saw declines of 5.7 percent and 5.5 percent, respectively.
The Federal Reserve’s decision to hold interest rates for the foreseeable future has been a boon for the industry, with 30-year fixed mortgage rates now at 4.10 percent. In addition, consumers are benefitting from a strategic move by homebuilders to reduce sales prices for new homes, the median of which was down to $302,700 in March and is expected to only grow moderately in April.
Yet by reducing home prices, homebuilders are putting themselves in a precarious situation as labor shortages and pending increases on tariffs will put pressure on margins. The National Association of Homebuilders had estimated that 10 percent tariffs would result in $1 billion in additional costs; a $2.5 billion increase would result in a 7 percent to 8 percent increase on new home prices.
