U.S. home sales will decrease 18% this year, due mainly to higher mortgage rates, limited inventory and high home prices, the National Association of Realtors (NAR) forecasts.
That’s on top of the 17% decrease in home sales last year.
“These high interest rates have had a great impact on the U.S.’ overall economic performance,” says Lawrence Yun, chief economist for NAR, in prepared remarks made during the Residential Economic Issues and Trends Forum at 2023 NAR NXT, The Realtor Experience, in Anaheim, Calif.
Yun says although GDP grew 4.9% in the third quarter, “there are some worrying signs in the economy,” the first being 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,” Yun says. “Just like in housing, businesses have to borrow money, and business spending is down because it’s more expensive to borrow.”
With regard to the labor market, Yun says, ”We are on the positive side of jobs data, but each passing month shows diminishing strength. Based on the trend line, employment could become negative. The upcoming GDP number looks to be worrisome.”
Yun says the 30-year mortgage and Fed funds rates have likely crested. He forecasts that interest rates will drop to between 6-7% by the spring buying season and anticipates that more sellers will enter the market.
“Builders are back on their feet, up 5 percent in newly constructed home sales year to date,” he says. “Builders can simply create inventory. In a housing shortage environment, builders are really benefiting.”
As Yun explains, the housing market will slowly start to recover as people are compelled to move due to life events.
”Pent-up sellers cannot wait any longer,” he says. “People will begin to say, ‘life goes on.’ Listings will steadily show up, and new home sales will continue to do well. Existing home sales will rise by 15 percent next year.”
