The new forecast also predicted that single-family housing will be unchanged in dollar terms next year, with a three percent decline in housing starts to 815,000. The expected decrease in homebuyer demand is attributed to higher mortgage rates, evaporating affordability options and the reduced tax advantages for homeownership as the result of the 2017 Tax Cut and Jobs Act.
On the multifamily housing front, the forecast is pointing to a six percent decline in dollars and an eight percent drop the number of new units to 465,000. Commercial building is expected to retreat by three percent after posting two percent gains in 2017 and 2018.
“An important question going into 2019 is whether deceleration is followed by a period of high level stability or a period of decline,” said Robert A. Murray, Chief Economist for Dodge Data & Analytics. “For 2019, it’s expected that growth for the U.S. economy won’t be quite as strong as what’s taking place in 2018, as the benefits of tax cuts begin to wane. Short-term interest rates will rise, as the Federal Reserve continues to move monetary policy towards a more neutral stance. Long-term interest rates will also rise, reflecting higher inflationary expectations by the financial markets. At the same time, any erosion in market fundamentals for commercial real estate will stay modest.”