The housing market has wobbled a bit recently, resulting from a recent rise in mortgage costs and a shortage of supply, the hangover from the 2008-09 Great Recession. Still, demand is in decent shape, according to Bank of America/Merrill Lynch.
The 30-year mortgage rate has risen to 4.9% from a low this decade of 3.3% in 2012. Housing starts dipped 3.7% in April, from the month before and residential building permits were off 1.8%, according to the US Commerce Department. New home sales were down 1.5%, the agency indicated.
Nevertheless, BofA/Merrill finds the longer trend is modestly upward, as housing starts have averaged 1.3 million during the year’s first four months, versus 1.2 million in the 2017 comparable period. Despite this, housing growth stock has stayed sluggish.
As a report from the firm noted: “During expansions, the housing stock usually outpaces population. By contrast, in this expansion growth in the housing stock has lagged well behind population, catching up only in the past year.” Rising loan rates and declining affordability do the housing market no favors, either. Nor does the new tax code, which limits state and local tax deductions, where property levies are a large component. The one segment of the market that is doing well is the high-end one.
Mortgage originations still are hindered by crisis-era-spawned lending restrictions. But on the bright side, the firm pointed out that “this limits leverage and makes another mortgage debt crisis unlikely.”