A brief excerpt:
Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2023. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in the newsletter (others like GDP and employment will be on my blog).
I’m adding some thoughts, and maybe some predictions for each question.
8) Residential Investment: Residential investment (RI) was a drag on growth in 2022 as the housing market slowed sharply. Through November, starts were down 1.2% year-to-date compared to the same period in 2021. New home sales were down 15.2% year-to-date through November. Note: RI is mostly investment in new single-family structures, multifamily structures, home improvement and commissions on existing home sales. How much will RI change in 2023? How about housing starts and new home sales in 2023?
…Here is a table showing housing starts and new home sales since 2005. Note that starts and new home sales declined sharply for several years following the housing bubble. Since I don’t expect significant distressed sales in this downturn, I don’t think the decline in starts and new home sales will be anywhere near as persistent as during the housing bust.
…
The outlook for 2023 depends on several factors: the Fed, mortgage rates, whether or not there is a recession in 2023, and inventory levels (both existing and new home inventory). My sense is this downturn will be more like each of the downturns in the 1980 period, as opposed to the six years of declining new home sales during the housing bust (there were two recessions in the 1980 period so new home sales did decline for several years). …
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