Elevated levels of inflation and mortgage rates and high construction costs are projected to continue the housing recession into 2023 and push the overall economy into a mild recession during the calendar year. Despite current challenges with affordability and slowing sales rates, the second half of 2023 could be a “turning point” for both the housing market and overall economy, according to NAHB chief economist Robert Dietz.
“Our expectation is that in the first quarter and the second quarter of 2023, we are going to see GDP declines. They are the dividends of tightening monetary policy by the Federal Reserve. We [also] expect a rise in the unemployment rate [in 2023],” Dietz said during The Outlook: A Complete Guide to Housing Trends, Forecasts & Insights for 2023 session at the 2023 International Builders' Show with Zonda chief economist Ali Wolf and Realtor.com chief economist Danielle Hale.
Dietz projected that with inflation showing signs of cooling, the Federal Reserve’s actions to raise interest rates should end in the first quarter of 2023 with a final rate hike in March. The NAHB projects the cumulative effect of the rate hikes will be a peak mortgage rate just above 7%. However, he said mortgage rates are expected to fall below 6% by 2024, setting the stage for a housing rebound in the second half of 2023 and 2024.
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