Housing sector

“The housing sector is in recession”, warns a leading construction economist | New

A leading AEC industry economist has warned that the US housing sector has entered a recession, with ramifications for homebuilding in the years to come. Robert Dietz, chief economist at the National Association of Home Builders (NAHB), make the comments at the National Association of Real Estate Editors’ annual conference in Atlanta, GA this week.

“What I think is beyond denial right now, beyond debate, is the fact that the housing industry itself is in a recession,” Dietz said at the conference. “We had two negative quarters of GDP earlier this year, we will soon see a positive quarter in the third quarter report, but then we will have negative growth in the fourth quarter and the first two quarters of 2023.”

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Dietz’s pessimism about the industry is fueled by the NAHB’s National Homebuilder Sentiment Index, a metric that, similar to the AIA’s Architectural Billing Index, is used as a proxy. industry performance. “It’s been falling for nine straight months in 2022, and it’s going to drop again when we report it for October,” Dietz told the conference. “For the year, it’s down 14% – the first year since 2011. It’s expected to fall again in 2023, and it’s only the following year that it will start to recover.”

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Although he noted that the United States maintains a housing shortage of around 1.1 million units (a separate analysis puts this figure at 5.5 million), Dietz believes that successive interest rate hikes by the Federal Reserve translate into a decline in housing construction activity. His analysis translates to Reuters report last week construction spending saw its biggest drop in 18 months in August, including the biggest drop in residential spending in two years.

While the downturn has yet to result in any layoffs across the industry, which Dietz says is due to the continued strong performance of multi-family projects, he warns that such layoffs could be on the horizon.

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Although pessimistic about new residential construction, Dietz added that the increase in people choosing not to move and continue to work from home will fuel continued strong demand for renovation services.

Forbes senior economics contributor Bill Conerly shared similar feelings on homebuilding in the outlet this week.

“Developers and contractors will suffer over the next two years as new construction declines,” Conerly wrote. “We are already seeing this in single-family construction. Multi-family projects generally have longer delivery times, and therefore more momentum in this crisis, but by next year multi-family construction will also be down.

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“Expansive monetary and fiscal policy over-stimulated the housing sector, and now tighter monetary policy is pushing it back,” Conerly added. “Unfortunately, roller coasters fit better in amusement parks than in residential neighborhoods.”

The warnings about the future of residential construction come despite a recent Dodge Momentum Index report that saw a dramatic increase in demand for data centers, commercial projects and institutional projects. However, the same index in August also showed a plateau in residential housing starts.