"The housing recession is essentially over," National Association of Realtors chief economist Lawrence Yun announced at last week's NAR Real Estate Forecast Summit. Yun said in essence, the housing market experienced a recession for the past two years as residential housing investment fell because of higher mortgage interest rates due to the Fed attempt to curb runaway inflation. The economy is slowly recovering today, Yun said.
Inflation, now at 3%, is beginning to calm down. In fact, Yun believes the recent rate hike was unnecessary because there is always a lag time between monetary policy and its impact on the economy.
According to government statistics, price growth has tamed for some products - gas is lower by 27%, airfare (-13%), although food is still up 5.8%, electricity (+5.4%), lodging (+5%).
Rents have increased but are likely to turn as apartment construction is now on at 40-year high. "Rent growth has been a primary driver for inflation, but it is just beginning to take a turn. The growth is slowing. Rents can't continually rise," said Yun.
There is more job creation, and the number of job openings is greater than those searching for jobs. Wage growth is not outpacing inflation.
Existing homes are still limited, housing starts are up, and new home sales are doing better than pre-Covid. The national median home price dipped 1% from a year ago, but the market is seeing consecutive month-to-month price increases, and despite higher interest rates, multiple offers continue.
NAR forecasts that the 30-year fixed-rate mortgage could reach 6.4% by year-end, followed by 6% in 2024. Compared to 2022, the national median home price is expected to fall to just 0.4% by year-end, reaching $384,900, then rebound by 2.6% in 2024 to $395,000.
New home sales are predicted to rise by 12.3% in 2023, and by another 13.9% in 2024. Housing starts are expected to fall 5.2% in 2023 from the prior year to 1.47 million, then rise 5.4% to 1.55 million in 2024.
Last week, California Association of Realtors chief economist Jordan Levine said after a major shift, the state's housing market is doing better today than the last 5-6 months. Levine believes the economy will have a soft landing next year, especially once inflation is under control.
The economy is still incredibly resilient despite vulnerability in the stock market. The market could potentially see more sellers, and buyers will have more options.
"We're much improved from where we were. The worst has been weathered up to this point," said Levine.
C.A.R. anticipates sales could approach 340,000 units next year. "The bottom is not going to fall out of the market. Make sure you look at the data and not the headlines," Levine told Realtors.
"Housing inventory, which includes new listings and total homes available for sale, is down by double-digits. Homes in Santa Clara and San Mateo counties are staying in the market a median of less than 10 days. The severe housing shortage, more than high interest rates, is limiting the recovery in home sales," said Jim Hamilton, president of the Silicon Valley Association of Realtors.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
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