The following is NAR Chief Economist Lawrence Yun’s reaction to this morning’s U.S. Commerce Department release on residential construction in December:
“The latest decline in the volatile housing starts data is disappointing, but surely not lasting. New home construction still closed out 2017 as expected, with 1.2 million units – the best since 2007. Given that the sales for both new and existing homes sold briskly throughout last year and at notably higher prices, housing starts should easily surpass 1.3 million in 2018. Some relaxing of regulatory rules in small-sized community banks will help improve credit conditions for developers. Should more construction come about, the much needed additional inventory will help calm home price appreciation. That would be a good trend for housing affordability, especially in a likely higher mortgage rate environment later this year.
The new tax bill, which caps mortgage interest and property tax deductions, was not the chief reason for last month’s decline. About 95% of new homes are priced below $750,000. Still, homebuilders will do well to focus on moderately-priced homes catering to first-time buyers. The entry-level price point is in dire need of new inventory heading into the spring.”