Housing Market Aiding GDP

We continue to look for the housing industry and the consumer to support GDP growth, as the manufacturing and export sectors falter under trade duress. The S&P/Case-Shiller National Home Price Index for November 2019 showed that prices gained 3.5% year-over-year, up from 3.2% in October but down from an average 5.6% in 2018. Looking into 2020, we expect price hikes to remain in the 3.0%-3.5% range, which is healthy for the industry -- and certainly does not indicate an overheated housing market or housing bubble. To make this forecast, we monitor several leading industry supply and demand indicators. These include inventory levels, which are normal. Currently there is a 3.0-month supply of existing homes for sale (the average range is 3.0-5.5 months), according to the National Association of Realtors. We also track new home sales, which according to the U.S. Census Bureau are running at a 694,000 per-year rate through December, down 0.4% month-to-month but up 23% year-over-year. Meanwhile, building permits in December were up 7% YOY, and borrowing costs have eased as the Fed has lowered rates. Thus, we conclude the bullish case for housing to support U.S. GDP growth remains intact.