US Home Building 2020

“The main issue is — the price of homes in the US remains too high and the lack of good affordable housing,” said Don Magruder, CEO of RoMac Building Supply, in Daily Commercial online at the end of 2019.

For the most part, this account is a good description of the US housing market.

WSPF-SYP-ESPF-2x4-Lumber-Price vs US-House Prices: Average 2007-2019

Affordable homes are selling much quicker than those above the US$225,000 level, explained Magruder. Commodity prices have moved lower this year and tariffs have not worked despite the double down. Housing starts through September are an anemic 0.8 per cent higher than last year and lackluster construction spending is driving the commodity markets downward. Even with declining yields on treasury notes, mortgage rates in the US have remained higher and liquidity is tightening.

WSPF-SYP-ESPF-2x4-Lumber-Price vs US-House Prices: Average 2016-2019

Housing starts 2020 will be unimpressive at best. While housing starts will probably end flat to up by single digits, there is a scenario if money continues to tighten that housing starts drop. There appears little chance of further interest rate reductions on mortgages and there could be a chance that liquidity tightens to a point that mortgages become a little more difficult to attain.

The gap between the wealthy and the working poor in the US is growing wider; at some point, there will be backlash. Fuelled by a continuous Presidential campaign, I think affordable housing could start emerging as a major political issue and citizens start demanding rent and price controls. Years of local jurisdictions mandating building codes, increasing building fees, and driving up housing costs are starting to roost in discontent.

Don Magruder, CEO of RoMac Building Supply

The national and local housing markets in the US have serious issues in affordability and fairness. The numbers and the sentiment will start showing more of that in 2020.

Western Spruce KD 2x4 #2&Btr prices Dec 2019