NAHB chief economists predicts sharp recession

By Robert Dietz | Builder

Current economic events are unprecedented over the past century. Not since the 1918 flu pandemic has there been as serious a public health crisis that has simultaneously generated a severe economic downturn. Due to coronavirus mitigation efforts—most notably government imposed state-level shutdowns—the economy will experience a sharp recession in 2020.

Forecasts for the second quarter are dismal but that is by public health policy design. During the second half of March and the first week of April, over 16 million initial jobless claims were recorded. GDP growth for the second quarter will likely be the worst in decades. Social distancing policies were imposed to provide a pause and reduce the spread of the virus. However, it’s important to remember these actions are only a pause to ramp up medical infrastructure and capacity. They cannot be a permanent policy tool due to their economic costs. The deployment of science and capital is how the U.S., through its market economy, beats any challenge.

I recommend builders view the current environment in the context of two months, two quarters, and two years. Through May, the industry should be prepared for ongoing stay-at-home orders. Due to state and local building associations working with state governments and the NAHB engaging with the Department of Homeland Security, residential construction as of press time had been deemed an essential business in all but five states. Thus, building can continue on most of the 540,000 single-family homes and the over 600,000 apartments now under construction, albeit with growing delays in terms of permit approval, engineering inspections, and subcontractor availability.

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