Mortgage Watch | May 20, 2019

Increased Chinese trade tariffs about to hit home

Builder confidence in the market for newly-built single-family homes remained unchanged in April at a level of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

Trade wars never happen without consequences to those down the line, and the latest increase in Chinese tariffs is hitting both homebuilders and remodelers where they live. Whatever project you have in mind, save a little more to get it done in 2019.

According to CNBC’s Diana Olick, from tile to countertops, laminates to lighting (about 450 types of items used in remodeling projects) worth approximately $10 billion a year in expenditures nationwide — are on the list that just went from 10% tariffs to 25%. The additional costs, therefore, rose from $1 billion to $2.5 billion, according to an analysis by the National Association of Home Builders (NAHB).

“The increase is on goods shipped starting last Friday, so the hikes will not hit U.S. shores likely until the start of June,” says Olick. “This buys negotiators a bit more time. Still, the tariffs are already hurting the remodeling business.” she quotes NAHB’s chief economist Robert Dietz: “NAHB’s forecast calls for slowing growth, given declining home price appreciation and existing home sales volume, combined with rising construction costs.”

Building experts are predicting that because the price of every project is going to go up, there would be no way remodelers could absorb those costs and survive. They estimate a 7-8% increase to the consumer no matter how they try to tweak it.

This comes as a double-whammy, with the homebuilding industry already struggling with a labor shortage. Nearly three out of four remodelers this year reported higher prices for customers due to higher costs for labor, according to a new survey from the NAHB.

“Higher costs for both materials and labor are causing some consumers to reconsider their renovations,” says Olick. “Case said the size of the average project went down dramatically last year, as consumers tried to cut the budget.” Increased tariffs in 2019 will only make it necessary to budget more before tackling your home remodeling dreams.

Source: CNBC, NAHB, TBWS

Rates Currently Trending: Neutral

Mortgage rates are trending sideways to slightly higher this morning.  Last week the MBS market improved by +20bps.  This may’ve been enough to move rates or fees slightly lower last week. We saw moderate rate volatility throughout the week.

 

About the Author

Tim Morissette, also known in the community as Mr. Foothill Ranch, offers over 46 years of real estate experience which has given him an established reputation and unmatched market knowledge. He is joined by his wife, Michele and sons Matt and Jeff, as they continue to offer personal service with an emphasis on achieving his clients’ real estate goals.  This unique combination of traits has led to his proven track record of referral and repeat business. This can be witnessed by the trust of homeowners in Foothill Ranch where he has sold twice as many homes and represented three times more buyers than the next-leading real estate agent for the last 26 years.

As residents of Foothill Ranch since 1994, Tim and Michele are actively involved in the community by fundraising for Foothill Ranch Library, Make-a-Wish Foundation, Cancer Society, Homes for Habitat, Relay for Life, South County Outreach, and the local church and schools. Tim enjoys sponsoring community-wide garage sales, paper shredding and e-waste recycling event, an Easter egg hunt, & a Meet Santa Event.

Tim and Michele are dedicated to their family of four sons, daughter-in-laws, and grandchildren. As a family, they enjoy many outdoor activities which include camping, spearfishing, mountain climbing and exploring the miles of hiking and equestrian trails in Foothill Ranch and the Whiting Ranch Wilderness Park. Tim and his sons are also avid snowboarders and enjoy mountain biking and lobster diving. Family is a top priority in the Morissette household. They look forward to helping more families achieve their dreams of homeownership.