Homebuilders: It's A Buyer's Market
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- Homebuilders had their backs against the wall in 2018 as a myriad of headwinds looked certain to derail the grinding post-recession recovery, sending the sector lower by 30% last year.
- Homebuilders were squeezed from both sides as rising mortgage rates forced homebuilders to cut prices while surging construction costs squeezed their already-razor-thin operating margins.
- The winds have shifted rather dramatically over the last five months as these headwinds have become favorable tailwinds. Unaffordability issues have been temporarily allayed by the plunge in mortgage rates.
- Rising wages powered the best year for household formation growth since 1985. Demographics become favorable for single family markets in the 2020s, though entry-level households may favor single family rentals.
- Homebuyers appear to have a short window of opportunity. Home price appreciation has moderated, but housing data is forecast to gain steam throughout 2019 if rates remain this low.
