Homebuilders: It's A Buyer's Market
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.