I am the chief economist of the National Association of Home Builders. These are the 5 things you need to know about the real estate market now

Robert Dietz

National Association of Home Builders

Many would-be homebuyers are watching as home prices begin to drop and are wondering: What do I need to know now about the housing market? (See here the lowest mortgage rates you may qualify for.) So we asked Robert Dietz these questions. Since joining the National Association of Home Builders (NAHB) in 2005, Dietz has been chief economist and senior vice president of economics and housing for the association, where he conducts real estate market analysis, economic forecasts, sector surveys and research on housing policies. Here are these thoughts on the real estate market now.

Mortgage rates will continue to rise.

Dietz says the housing market is likely to experience continued interest rate hikes in the foreseeable future as the Federal Reserve tightens monetary policy. “We should expect the Fed to maintain these tighter conditions for much of 2023 as inflation moderates. Then, in 2024, housing demand for the sale of new and existing homes will pick up, as construction expands. homes to help reduce the existing housing deficit, “says Dietz. (See the lowest mortgage rates you may qualify for here.)

Builders will build fewer homes: in fact, 2022 will be the first year since 2011 for which construction of single-family homes will decline from the previous year, he says.

After a construction boom in the second half of 2020 and 2021, the home construction sector is contracting, says Dietz. “Builder sentiment, as measured by the NAHB / Wells Fargo Housing Market Index (HMI), has declined over the past eight months, dropping to its lowest level since 2014. The decline in HMO reflects weakening market conditions for builders of homes, including the current conditions of sale and buyer traffic. The decline in sentiment also indicates that single-family housing will continue to decline in the next quarter, ”says Dietz.

He says home construction has contracted as the affordability of housing has dropped to its lowest level in more than 10 years due to rising mortgage interest rates. This combined with higher construction costs that have increased by 35% since 2020 and have assessed the demand from homebuyers.

But in the very short term, buyers may have more inventory to choose from.

“In the short term, inventory will increase due to an away price for buyers due to higher interest rates, but the market is still missing, according to NAHB estimates, about one million homes given the current US population size and household characteristics. This means that just as housing drove the economy in terms of weaker conditions in 2022, the real estate sector will also pave the way for a rebound in economic growth due to a persistent housing deficit, “says Dietz.

Although the current market is reminiscent of the 2007-2009 housing crisis, that housing boom and bust was produced by poor mortgage underwriting and housing glut, Dietz says. “Conversely, today’s market has a real estate deficit, which while requiring navigation in difficult affordability conditions, will ultimately result in real estate expansion to meet future demand,” Dietz says.

There are multiple ways to get great value for money for many buyers.

Thanks in part to remote working, buyers now have the potential to buy homes in a larger market area than before, potentially expanding their ability to get more money for their money. “Up to a third of the US workforce now thinks of weekly commuting rather than daily commuting in terms of time and transportation costs. This shift in the geography of housing demand has led to further construction in the outer suburbs for single-family housing and suburban multi-family buildings, ”says Dietz. (See the lowest mortgage rates you may qualify for here.)

The remodeling market will continue to expand during the current period of weakness due to homeowners wanting more space, more energy efficiency, and an ongoing aging trend for baby boomers.

Dietz says, “This reinvestment in existing real estate assets will strengthen the existing home sales market as the real estate market goes into recovery mode following lower inflation.”

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