Amid, in spite of, and–quite possibly–a cause factor in the sudden paroxysm of volatility roiling global stock markets, economic strength, jobs, and wage growth among American households gain momentum by the day.

Through January, economic confidence has been on the rise. A Wall Street Journal/NBC News Poll notes that the share of Americans who say they’re satisfied with where the economy’s going rose to 69% in January, up from 56% in Spring 2017.

A vector in both buoyed expectations for economic and jobs growth and a wake-up call of worry over inflation is the Tax Cuts and Jobs Act, signed into law by President Donald Trump on Dec. 22, with immediate profound and far-reaching effects on both households and companies. Knowledgeable observers go so far as to suggest that–given the lack of slack in the jobs marketplace, with unemployment at a low 4.1%, the stimulative effect of the huge corporate tax cut could overheat the economy, and outrun the ability of the country to pay for its tax benevolence.

Our course, one of the biggest changes in new tax laws reduce what corporations pay as their going tax rate, from 35% to 21% of revenues. (If you haven’t checked out Steven M. Friedman’s “Everything You Need to Know About the New Tax Law,” you can do so now.)

Collectively, BUILDER’s top 200-ranked companies will likely total upwards of $90 billion for 2017, and the tax savings–the 14% differential between 35% and 21% corporate tax rate–translates into significant opportunity among these firms to pay for land, people, and projects.

To get a sense of how the $1.4 trillion tax cut may play out in the home builder business community, we talked about the impacts, the opportunities, and the multiplier effects of the program with Meritage chairman and CEO Steve Hilton.

In reporting fourth quarter 2017 earnings last week, Meritage actually took a $19.7 million charge associated with a revaluation of the company’s deferred tax asset. This was a financial and accounting step that reflects its new lower tax rate and the expiration of energy tax credits that benefited the company’s 2016 performance.

But going forward, says ceo Hilton, the effect of the sweeping tax reform is all upside. Here’s a few sound-bites from our recent exclusive interview with the nation’s No. 8-ranked home building enterprise.

Steven J. Hilton

Steven J. Hilton
  • “I think [tax reform] is phenomenal for our economy,” says Hilton. “I totally support it. It will create jobs.
  • “For Meritage Homes, it’s probably $20- to $25 million less taxes we’re going to pay on an annual basis looking forward to the next year.
  • “That $20- to $25 million will probably be four or five new communities for us, which will result in 20 to 30 additional employees on the Meritage payroll; and probably more than 100 employees that work for our trade partners and vendors that we do business with.
  • “It will create jobs.”
  • “Now the challenge in residential construction is finding the people to fill those jobs. But, if anyone can we can, and it will help our business. And it will help us satisfy the need for affordable housing in this country.”

Hilton also shared a perspective on where we are, at the beginning of 2018, in the current housing cycle, and what that means.

  • “A lot of people ask me ‘what inning are we in?’ and I hate that question. The last cycle went for 14 years. And if you go back in history, and you look at every single major correction in housing, everyone of them related to some kind of changing government policy. I don’t see any significant change in government policy on the horizon, so I feel like we have a lot of innings left in this cycle.
  • “I think home building is a local business, and some markets around the country are farther along, and they’ve already surpassed peak housing prices. They’re becoming a little less affordable. Other markets, for example the one I live in, Phoenix, Az., we’re still not back to peak housing levels. And we’re 10 years past the bottom of the housing market. And, particularly in that market, I think we have a long, long way to go.
  • “It varies by market, but I still think we’re in the early-to-mid-innings of this cycle.”

Note: This begins a series of exclusive one-to-one CEO-level conversations with the editors of BUILDER, aimed at sharing high-level insight and perspective on housing’s challenges and opportunities in 2018.