December 5, 2022
SPECIAL UPDATE: HOUSING MARKET FORECAST
We are revising our forecast for the Housing Market. While it won’t be similar to the Great Recession for housing, how long are we anticipating weakness in the Housing Market? Find out with the latest episode of TrendsTalk with ITR CEO and Chief Economist Brian Beaulieu.
The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.
Hello, I’m Brian Beaulieu, CEO, Chief Economist of ITR Economics and this is a special message letting you know about a change in a forecast. We’ve been adjusting our housing forecast it seems like every six months. Going through this COVID period of excesses, we saw excessive rise, we saw our ongoing strength longer than we thought it would, and now we’re seeing some pretty significant weakness in the housing market, and that has led us to seemingly chase this forecast. Every six months we’re seemingly revising this forecast, and we’ve had to do that again, and I apologize for that and I’m sure you’re as frustrated as we are with this slate of events.
We’re still looking for a double dip decline in housing, it’s just going to be more severe than we thought it would be. With inventories remaining low, real incomes rising, homeowner vacancy rates remaining low, this isn’t going to turn into another great recession for housing, but it does mean that we’re going to see weakness normally carry through to about mid 2023, and then we think we’ll get some modest, or a modicum of rise anyways, in housing starts in the second half of 23 largely because of those tight inventories.
But then 24 changed the outlook more. Well, percentage wise, it’s about the same changes we’re putting through in 2023. In 2024, what we had thought previously that the recovery trend would continue, we no longer are looking at recovery continuing in 2024. And we can largely lay that off to the inverse yield curve, which we now have upon us. It’s going to cause difficulties to linger on, or come back again to hit this particular market in the second half of 24, and probably linger on through 2025.
There’s a trends talk recently we have done that talks to this point about the inverse yield curve and how it is worse than we have anticipated, worse than we’ve ever seen before in the annals of modern economic history. And that’s something to contend with, and it’s clearly impacting the housing market.
There are other favorables, like I just mentioned, in terms of the vacancy rates, incomes. Joblessness remains very low. Still have 9.5 million private sector job openings. But on the downside you have the consumer that is draining their income. That’s relatively rare event and it is not a good sign for the housing market. And we have the inverse yield curve, which means we’re no longer looking at just an interest rate phenomena. It’s more than just interest rate sensitivity impacting housing now. There’s a whole new systemic dynamic that has to be baked into the forecast.
Effectively, what it means is that we have lowered our 2023 forecast by about 13%, and for 2024, it’s down also about 13%. I think the biggest change you’re going to feel, though, is in the direction for 2023. We had been saying essentially a flat year relative to 2022, and now we are saying 2023 will be down 9.4%.
For those of you who subscribe to the ITR Trends Report, you’ll see that in the Trends Report page being released shortly. And for those of you that look at housing through your reports, or your EBP programs, you’ll be seeing the change in forecast when it comes about. We wanted you to know why we had to change it again, and I hope I have accomplished that here.
If you have any additional questions, please reach out to your trusted advisor, or the Trends Report contact number, and they will be glad to walk you through this. Or you can feel free to send me an email and I will personally respond. My email address is email@example.com. Thank you very much for listening, and we will continue to watch this situation very, very closely as we go through some more COVID Echo extreme behavior.