{"id":5474,"date":"2023-05-10T15:19:39","date_gmt":"2023-05-10T15:19:39","guid":{"rendered":"https:\/\/realestateagentmagazine.com\/?p=5474"},"modified":"2023-05-10T15:19:39","modified_gmt":"2023-05-10T15:19:39","slug":"feds-recent-rate-hike-was-unnecessary-says-nar-chief-economist-lawrence-yun","status":"publish","type":"post","link":"https:\/\/realestateagentmagazine.com\/feds-recent-rate-hike-was-unnecessary-says-nar-chief-economist-lawrence-yun","title":{"rendered":"Fed\u2019s Recent Rate Hike was Unnecessary says NAR Chief Economist Lawrence Yun"},"content":{"rendered":"

WASHINGTON, D.C.\u2014National Association of Realtors\u00ae<\/sup>\u00a0Chief Economist Lawrence Yun said the Federal Reserve\u2019s most recent rate hike was unnecessary, and he expects the Fed will stop raising interest rates further, during the \u201cResidential Economic Issues & Trends Forum\u201d at NAR\u2019s 2023\u00a0REALTORS\u00ae<\/sup>\u00a0Legislative Meetings.<\/p>\n

Yun discussed recent developments in the U.S. economy and their impact on the housing market. Robert Dietz, chief economist for the National Association of Home Builders, talked about the challenges that homebuilders continue to face and possible changes in the building sector. The forum closed with a panel discussion between Realtors\u00ae<\/sup>\u00a0Bobbi Howe and Maura Neill, who examined the current market conditions and challenges in their areas.<\/p>\n

Yun explained that the Fed\u2019s aggressive rate hikes have hurt regional banks and the housing market. He noted that inflation has already started to calm, but rents on apartments and single-family homes remain elevated.<\/p>\n

\u201cInflation will not reignite \u2013 inflation will come down closer to 3% by the year\u2019s end,\u201d Yun stated. \u201cInflation has calmed down while rents are still accelerating.\u201d<\/p>\n

Yun said apartment construction has reached a 40- to 50-year high.<\/p>\n

\u201cRent growth will decrease because apartment construction \u2013 entry units coming on the market \u2013 is already in the pipeline,\u201d Yun added. \u201cWe are already moving in the right direction towards consumer price inflation.\u201d<\/p>\n

Yun said that new home sales are back to pre-pandemic\u00a0levels,\u00a0however, existing-home sales are historically low. Currently, housing inventory is down 40% compared to 2019. The housing market is being held back by the lack of housing inventory, a problem that existed before the pandemic.<\/p>\n

\u201cWe have to stop the bleeding before improvement takes place,\u201d he said. \u201cWe need to get more inventory, and the long-term solution is more home building.\u201d<\/p>\n

Yun explained that housing prices have run up dramatically because of the housing shortage but said recent price declines are temporary.<\/p>\n

\u201cHome price increases are naturally good for homeowners,\u201d stated Yun. \u201cEveryone participates in wealth gains if you\u2019re a homeowner.\u201d<\/p>\n

Yun said there is a wealth gap between the typical homeowner and renter. He also said the homeownership rate has increased slightly, which means that more Americans will experience wealth gains and long-term financial security.<\/p>\n

Yun forecasts that mortgage rates will fall closer to 6.0% in 2023 and go below 6.0% in 2024. He expects new and existing-home sales to bottom out in 2023 before an upturn in 2024.<\/p>\n

Dietz agreed with Yun about housing supply and inflation.<\/p>\n

\u201cHow do we solve the lack of inventory?\u201d asked Dietz. \u201cWe\u2019ve got to building more housing.\u201d<\/p>\n

He said that inflation is heading lower and the actions by the Fed since 2022 are working. Dietz added that we must build more affordable housing to tame inflation.<\/p>\n

Dietz also highlighted the supply-side factors that pose a challenge for builders. Building materials costs have accelerated significantly. While the good news is that materials are 1-2% cheaper, the bad news is there is less demand for building, Dietz noted. High lumber prices have come down but that\u2019s because demand for lumber has reduced. There is a lack of labor for construction jobs. Acquisition, development and construction loans are very high \u2013 at 11-12%. By raising interest rates, the Fed made it more expensive to build and develop housing. Regulatory costs also inhibit housing inventory improvements.<\/p>\n

\u201cIt\u2019s death by a thousand cuts,\u201d said Dietz. \u201cIt\u2019s impossible to build entry-level housing when you\u2019ve got \u2013 before putting a shovel in the ground \u2013 $200,000 in regulatory costs.\u201d<\/p>\n

From a construction perspective, Dietz stated that the remodeling market is the healthiest part of the building industry right now. He said that in the country\u2019s housing stock, the average home is 41 years old. Dietz also stated that the custom-home building market has not declined; it\u2019s gaining market share, and it had the best quarter of construction since the Great Recession. He said the market has cooled for single-family, built-for rent homes, however those will remain an important part of the ecosystem. The apartment market continues to be strong, and there are 950,000 apartments under construction.<\/p>\n

Dietz forecasted that the Fed will ease interest rates in 2024 but not in 2023.<\/p>\n

\u201cThe back half of this decade looks really good,\u201d Dietz added.<\/p>\n

To close the event, Howe and\u00a0Neill\u00a0discussed opportunities in this real estate economy. Howe recommended taking emotion out of the equation and using the national-level data and breaking it down locally.\u00a0Neill\u00a0advised to come from a place of curiosity, and keep in mind that national data needs to meet client needs. She also recommended coming from a place of abundance as opposed to scarcity in the context of high interest rates.<\/p>\n","protected":false},"excerpt":{"rendered":"

WASHINGTON, D.C.\u2014National Association of Realtors\u00ae\u00a0Chief Economist Lawrence Yun said the Federal Reserve\u2019s most recent rate hike was unnecessary, and he expects the Fed will stop raising interest rates further, during the \u201cResidential Economic Issues & Trends Forum\u201d at NAR\u2019s 2023\u00a0REALTORS\u00ae\u00a0Legislative Meetings. Yun discussed recent developments in the U.S. economy and their impact on the housing […]<\/p>\n","protected":false},"author":45,"featured_media":5475,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":["post-5474","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-news"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/posts\/5474","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/users\/45"}],"replies":[{"embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/comments?post=5474"}],"version-history":[{"count":2,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/posts\/5474\/revisions"}],"predecessor-version":[{"id":5477,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/posts\/5474\/revisions\/5477"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/media\/5475"}],"wp:attachment":[{"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/media?parent=5474"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/categories?post=5474"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/tags?post=5474"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}