National Association of Realtors Chief Economist Lawrence Yun expects that home sales will decline by 18% by the end of 2023, but he offered up some good news for 2024.
At the Residential Economic Issues and Trends Forum in California, Yun forecasted that interest rates would drop to 6-7% by the spring buying season and anticipated that more sellers would enter the market.
“Builders are back on their feet, up 5% in newly constructed home sales year to date,” said Yun. “Builders can simply create inventory. In a housing shortage environment, builders are really benefiting.”
Also, borrowers are beginning to realize that life must go on.
“Pent-up sellers cannot wait any longer. People will begin to say, ‘life goes on,’” said Yun. “Listings will steadily show up, and new home sales will continue to do well. Existing home sales will rise by 15% next year.”
Yun also said that international buyers have declined, but once they return to the market, there will be a boost in buying.
Yun, who watches the market closely, believes things are about to turn around.
He referenced the latest GDP figure, which grew by 4.9%, but warned, “Statistically, this is much better than the historical average, but if we look at this component, there are some worrying signs in the economy.” The first is that business spending is essentially flat. The second is that goods inventory is rising, meaning products are being produced but not getting sold.
“We cannot keep adding to the shelves,” said Yun. “Just like in housing, businesses have to borrow money, and business spending is down because it’s more expensive to borrow.”
Yun also addressed jobs, stating, “We are on the positive side of jobs data, but each passing month shows diminishing strength. Based on the trendline, employment could become negative. The upcoming GDP number looks to be worrisome.”
He also told the audience that the Consumer Price Index (CPI) is much calmer and indicates that the Federal Reserve should adjust its monetary tightening posture.
Yun, who spoke at NMP's Originator Connect event back in August, reminded the audience that there’s a lag between what the Fed does and how it impacts the economy. He said that means the number of rate hikes it has already done will likely push inflation below its current 3.2%. Just yesterday, the latest CPI numbers were essentially flat for October at 3.2%.