Looking at construction spending, the lack of affordable rentals in rural areas presents a unique opportunity for investors plus several reports on the economy and housing…
Construction Spending August 2018
From the Census Bureau:
Construction spending during August 2018 was estimated at 0.1% above the revised July estimate and 6.5% above the August 2017 estimate. During the first eight months of this year, construction spending was 5.3% above the amount for the same period in 2017.
Spending on private construction was 0.5% below the revised July estimate. Residential construction was 0.7% below the revised July estimate. Nonresidential construction was 0.2% below the revised July estimate.
While things have improved greatly since the housing market/economy crashed, it is the recent weakness or slowdown that is concerning. Definitely something to watch in the coming months…
Business Economists Outlook Remains Optimistic
Highlights from the October 2018 NABE Outlook Survey:
- The median forecast for real GDP growth from Q4 2018 to Q4 2019 calls for a moderation to 2.5%
- On an annual basis, real GDP growth in 2018 is expected to be 2.9% and 2.7% in 2019
- 51% of those surveyed think trade tensions will lower GDP in 2018 and 2019
- 41% say trade policy is the biggest risk to the economy
- 2/3 expect a recession to begin by the end of 2020
A decent forecast other than another prediction of a recession in 2020 but no one ever knows what the future holds. All we can do is hope for the best while planning for the worst as we work towards achieving our goals in life.
Good News for Manufacturing and the Economy
The ISM just reported that economic activity in the manufacturing sector expanded in September, and the overall economy grew for the 113th consecutive month.
Obviously great news and despite another scary prediction of a recession, the economy appears to be doing OK. Remember, we need a healthy economy for a healthy housing market and a healthy housing market for a healthy economy.
Housing Market Still Solid
Highlights from the AEI’s National Housing Market Indicators Q2 2018:
The national home purchase market remained solid in Q2 2018. Sales transactions increased 0.2 percent in the second quarter compared to a year ago, marking the 15th consecutive quarter of such increases.
AEI’s house price index for 73 metro areas increased 7.0 percent year-over-year during the first quarter of 2018. House prices appreciated even faster (8.2 percent) in the low price tier.
At first glance, this sounds pretty good but the AEI says that federal agencies are causing the housing supply balance to get worse by easing credit standards. They say that this is causing an increase in mortgage risk, especially in areas with low-income borrowers.
Sounds like deja vu…
Lack of Affordable Rentals in Rural Areas
From the Urban Institute:
Fifty-four million rural residents live in USDA-eligible areas that have a most severe need (8 million) or moderately severe need (46 million) for the production of more affordable rental housing. 152 counties with most severe need experience more unemployment and overcrowding than other counties, while the 1,136 counties with moderately severe need typically face greater population growth and lower rental vacancy rates.
Building more affordable units in rural communities will require stakeholders to address challenges and explore opportunities.
There is no doubt that the lack of affordable rentals in rural areas does present us with challenges and opportunities. While some would think this means the government, it shows investors an untapped opportunity without the high costs and competition in urban areas.
Sorry for the lack of posts lately as I have been battling a nasty cold or virus. Of course, this only means there is a build of pressure in the blogging machine so stay tuned!