In the face of slowing growth and lingering trade tensions, commentary from CNN states that the U.S. economy needs housing to continue improving to “keep the current recovery alive.”
The National Association of Home Builders reported earlier in October that builder sentiment is at its highest level since February 2018, and this year’s increase is the biggest 10-month change in more than six years.
“The housing rebound that began in the spring continues, supported by low mortgage rates, solid job growth and a reduction in new home inventory,” said Greg Ugalde, NAHB Chairman.
Robert Dietz, NAHB Chief Economist, said the gains in single-family construction during the second half of 2019 is mirrored by the rise in builder sentiment over the past few months. Dietz, though, added builders “continue to remain cautious” due to ongoing supply considerations and concerns over an economic slowdown.
"With homebuilder sentiment so strong, it's hard to imagine that the economy is on the cusp of a downturn," said analysts at Bespoke Investment Group in the CNN report.
CNN added that “there seems to be no end in sight” to the housing boom in many parts of the U.S.
Additionally, CNN says that historically-low mortgage rates is a key factor in housing growth in 2019.
"There is no better sentiment than people willing to make 30-year commitments for a home," said JJ Kinahan, Chief Market Strategist with TD Ameritrade, in the piece. "When people have jobs, they are willing to spend money. The solid housing market is the side effect of a great job market."
In its latest release, however, Freddie Mac stated that the average rate of a 30-year fixed-rate mortgage rose to its highest level in 12 weeks to 3.75%.
In an effort to stimulate the economy, the Fed cut interest rates twice in 2019, with the most recent decrease coming in September. The Fed lowered its overnight lending rate to a target rate of 1.75% to 2%.
Despite the rate cut, which had been anticipated since the rate cut earlier this year, Reuters reports that seven of 17 policymakers projected one more quarter-point rate cut in 2019, signaling divisions in the Fed.