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Commenting on the housing market data released from the United States on Monday, “The NAHB homebuilder confidence index eased slightly to 70 in November from 71 in October,” noted ABN AMRO senior economist Bill Diviney.

Key quotes

“Housing has been one of the notable bright spots in the US economy over the past year, with homebuilder confidence back at elevated levels having declined significantly in late 2018. Anecdotal reports from the NAHB survey suggest a key driver has been the significant fall in mortgage rates, with the 30-year fixed rate having fallen more than 1pp since the end of last year to 4.0% as of November.”

“This rise in confidence was finally reflected in the residential investment data for Q3, which showed 5.0% annualised growth following six consecutive quarters of contraction. We expect housing investment to continue recovering over the next few quarters, however labour market constraints are holding the sector back from growing more significantly.”

“While the outlook for housing looks solid, this won’t provide much support for growth. As a share of GDP, housing investment is half the size it was back in the heady pre-crisis days, when it peaked at c.6% of GDP in 2005. Even in a very optimistic scenario of housing growing 10% annualised for the next few quarters (the fastest since 2013), it would add just 0.1pp to growth beyond what is in our baseline scenario (2.5%). While a stronger housing market is to be welcomed, then, it certainly cannot be relied upon to prevent the US economy slowing over the next few quarters.”