Weakness abounds in the housing market as building, sales have stalled

Weakness abounds in the housing market as building, sales have stalled
29/08/2018 , by , in ALLIED

A package of weak data on both housing starts and home purchases indicates that housing and construction remains one of the few areas of weakness in the economy in the 3rd quarter. This has put some downward pressure on freight demand, as the movement of building materials, furniture, and appliances is influenced by the strength of the housing market.

Scarcity of labor, land have restricted the housing supply

Part of the reason for the disappointment in housing starts has been the rising costs for construction materials. Prices for lumber skyrocketed earlier this year after Canadian supply disruptions and US tariffs on lumber imports. This, in turn, has raised the cost for builders. However, lumber and materials prices have come down after peaking a couple months ago, and new home construction continues to struggle.

Home builders have also struggled with a lack of developed lots for building. This shortage of available lots for construction means that prospective home builders have to pay more for the limited supply available. This adds to the costs of building new homes, and further contributes to the disappointing building activity in 2018.

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