Although some positive economic indicators, the US is still headed for a recession sometime in the first half of this year, said Fannie Mae Chief Economist Doug Duncan. But 2024 looks like a better year for housing.
In his latest report, Duncan predicted that, in the fourth quarter of 2023, the national economy will decrease year-on-year by 0.6%, one-tenth of a percent. less of a decline than projected in his December outlook. The fourth quarter of the GDP of 2022 changes compared to the same period in 2021 rose to 0.8% growth from 0.4% in December.
“There are economic indicators that indicate a recession but also signs that a ‘soft stop’ may be coming,” Duncan said in a press release. “In our view, the balance still shows a low deficit, especially if the Federal Reserve maintains its focus on the labor market.”
There are even signs that the labor market is slowing down, especially in many high-profile companies such as Google, Microsoft and Wayfair for example, the entire project remains dynamic as shown by the December Bureau of Labor Statistics data, he continued.
“The market sees the Federal Reserve tapering in the second half of the year, which could mean either a recession is coming or a slowdown in inflation will lead to in declining financial conditions,” Duncan said. “If the latter happens, the low rates will likely set the stage for a housing boom through 2024, as can be seen in our latest report.”
But if the The Fed is holding its line and keep raising short-term interest rates to make sure inflation doesn’t rise again, “and then inflation.” “This is accompanied by a renaissance of buildings,” Duncan said. “In any case, we expect 2023 to be a slow year for the housing market.”
His January report called for $1.64 trillion in total startups this year, down from $2.34 trillion in 2022 and $4.57 trillion in 2021. December view expected $1.67 trillion of mortgage production in 2023.
Total sales could fall to $1.28 trillion in 2023 from $1.66 trillion last year, but the industry has weakened refinancing and is expected to drop another 50% , to $ 356 billion from $ 683 billion.
Despite his positive words for the housing market in 2024, Duncan cut his outlook for mortgages next year to $1.97 million from $2.11 million in the December outlook.
The latest report calls for $1.42 million in sales, compared to $1.53 million in the previous month.
In January, Duncan predicted that the number of home sales will fall over 21% this year compared to 2022 to 4.52 million units on a seasonally adjusted basis, before recovering to in 2024 to 5.1 million units, a gain of almost 13%. Those fell from December’s forecast of 4.57 million units and 5.24 million units of total home sales.