By Michael Gerrity | World Property Journal
According to the National Association of Home Builders, the U.S. housing recession that began in 2022 will bleed into 2023 as elevated inflation and mortgage rates, coupled with stubbornly high building material construction costs, continue to take a toll on the housing industry and are expected to push the overall economy into a mild recession this year. However, the second half of 2023 could lead to a turning point for housing and the economy.
“With interest rates projected to normalize in the second half of 2023 as the Federal Reserve taps the brakes in its fight against inflation, the pace of single-family construction will bottom out in the first half of 2023 and begin to improve in the latter part of the year,” said Robert Dietz, chief economist of the National Association of Home Builders (NAHB), during a housing and economic outlook press briefing at the 2023 International Builders’ Show. “This forward momentum will lead to a calendar year gain for single-family starts in 2024.”
And while home prices are declining in many U.S. markets, this has not been enough to boost housing demand. Affordability conditions continue to deteriorate as mortgage rates have more than doubled since the beginning of 2022. The difference between a 3% and 6% mortgage rate can add more than $700 per month to the cost of a typical home loan. As a result, NAHB is forecasting that home prices could fall as much as 15% in 2023 following a nearly 40% Covid-era gain.
In another sign of the current housing recession, the top five single-family markets all posted declines in 2022 when comparing the number of permits issued year-to-date through November 2022 vs. the same time period through November 2021. The markets in descending order are Houston-The Woodlands-Sugar Land, Texas; Dallas-Fort Worth-Arlington, Texas; Phoenix-Mesa-Scottsdale, Ariz.; Atlanta-Sandy Springs-Roswell, Ga.; and Austin-Round Rock, Texas.