Through the first three quarters of 2019, the total number of new houses started in the U.S. was down just over 2 percent when compared with the same period a year earlier. But here again, the data from the fourth quarter is surprisingly strong. Due to seasonal patterns, I tend to not lean too heavily on the data from the fourth quarter; however, it is conceivable that the gain in the fourth quarter will be enough to push the annual total up to flat for the year. And that is too much momentum here at year's end to ignore.
Based on this recent surge in activity, I have raised my forecast for housing starts in 2020 up to a gain of 5 percent. This will put the annual total in the range of 1.3 million units for the year. The last time the annual total for housing starts hit 1.3 million units in a year was 2007.
Those of us who track the plastics industry closely tend to think of the auto sector as a bellwether for demand for plastics products. But one of the best leading indicators for the auto industry in particular, and the U.S. consumer sector as a whole, continues to be the trend in housing starts. If it is a good time to buy a new house in America, it is a good time to buy almost everything else.
Household incomes are rising faster than the rate of inflation, home prices are also rising, yet interest rates remain quite low. Furthermore, the rate of new household formations is not only rising, but the pace of growth has accelerated in the second half of this year. So I expect the residential construction sector of the U.S. economy to remain quite healthy in 2020. The major impediments to demand growth for plastic construction materials next year will continue to be due to supply constraints, namely the shortage of qualified workers.