In a recent MarketWatch article by reporter Alisa Wolfson, NAHB chief economist Robert Dietz shares his thoughts on the current state of the housing market. His first prediction is mortgage rates will keep climbing as the Federal Reserve tightens monetary policy. Then, in 2024, housing demand for both new and existing home sales will recover, with home building expanding to help reduce the housing deficit. Read on for four more of Dietz’s predictions.
Builders will build fewer homes: In fact, 2022 will be the first year since 2011 for which single-family home building will decline compared to the previous year, he says.
After a construction boom in the second half of 2020 and 2021, the home building sector is contracting, Dietz says. “Builder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), has declined for the last eight months, falling to its lowest reading since 2014. The decline of the HMO reflects weakening market conditions for home builders, including current sales conditions and buyer traffic. The fall in sentiment also indicates that single-family construction will continue to decline in the coming quarter,” says Dietz.
He says home building has contracted as housing affordability fell to its lowest level in more than 10 years amid increasing mortgage interest rates. That has combined with higher construction costs which have risen than 35% since 2020 and priced out home buyer demand.
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