30 Aug Recession Talk and Home Builders

As talks of an economic recession continue to increase, homebuilders’ confidence could change. Currently, builder confidence for single-family homes rose to 66 in early August. And their confidence has been well-founded given the circumstances.

Optimism Amongst Home Builders

Builders have 4 components that lead to this optimism. Interests rates have been at all-time lows for several months now, high value engineered/low price small homes are a prioritized product, buyer incentives are good, and the unemployment rate is low. So, despite building costs being high, home builders believe home buying is good.

However, with recession talks on the horizon, will we see a dip in home buying and building? That is difficult to predict. Consumer spending is still a driving force moving the U.S. economy. The majority of the downturn has been kept to the business sector and therefore could keep home building insulated.

The Catch

Yet, things may change. Consumer confidence may go down as businesses weather turbulence in the market, leading to a reduction in consumer spending. It’s challenging to predict what the future holds for home builders, especially with such a mix of positive and negative signs. We’ve seen this trend many times before.

The best course of action for home builders is to continue watching the trends of the market and make corrections as needed. Recessions are bound to happen as a natural occurrence in the market, and builders working with foresight will be able to keep their businesses on track in most situations. Until then, builders can continue enjoying a strong market.

Bruce Freides