Looking at the housing market at the beginning of 2019, Brent Anderson didn’t like what he saw. Mortgage interest rates had jumped from the high 3s to flirting with 5% for the first time in a decade. Sales of higher-end move-up homes—the bread and butter of this home building cycle—had suddenly tanked, as potential homeowners felt “buying fatigue” in the face of ever-rising prices. It seemed that the sales spigot, which had only been turned on in fits and starts since the end of the Great Recession, had finally been tapped out.
To top it off, the Federal Reserve had been on a hawkish tightening spree, with at least two more interest rate hikes anticipated for 2019. At the same time, economists were calling for a general economic pullback. With a slower housing market typically being a leading indicator of recession, all signals seemed to be in place for exactly that to happen.
So when Anderson, vice president of investor relations at Scottsdale, Ariz.–based Meritage Homes, considered Question No. 23 of his annual Builder 100 survey—“What is your outlook for housing in your markets for 2019?”—he ticked off “Mostly Negative.”
“We saw a pretty choppy market in the third quarter of 2018, and then in the fourth quarter, it weakened even more,” Anderson recalls. “The market seemed to be getting very soft, very quickly.”
What a difference half a year makes.Read More