Time now for our Wall Street week daily segment, the host of Wall Street Week
David Westin. Joining us as he does every day at this
time. And David, as we close out the first
half of this year. I think one of the more surprising
elements in the market has been the housing market itself.
Yeah, we thought we were in something, a recession, action, housing.
And now let's go amongst the bounce back.
And I'm not sure that's good news or bad news in terms of the economy, but we
know somebody who does know the essay question.
She is Nancy Vanden, an Oxford economics lead us economist.
So, Nancy, thank you so much for joining us.
First of all, were you as surprised as some others were in the room bounce back
the last couple of months and the housing numbers?
Well, first, thank you for having me. I think in over the last several months,
particularly in the wake of a sharp rise in mortgage rates there and some things
about housing that have been surprising, other things that have been let go.
I think one of the surprises to us has been the resilience in the
market for new home sales, maybe taking a step back.
We should be less surprised because the new home market is benefiting from a
very severe shortage of existing homes for sale.
And also homebuilders have been fairly aggressive in offering incentives to
clear their inventory, putting price reductions in some cases helping buyers
with the market rate. So, again, taking a step back, perhaps
we should not be surprised about the strength there.
Nancy, from your understanding of this market, are we seeing a real turnaround?
We've had a couple of months now, strong numbers.
Do you expect that to continue through the end of the year?
Or could we have a turnaround yet again back down?
Well, I are for catastrophic spirit is for these recent strong numbers not to
be sustained. We think that the shortage of existing
homes will continue to support the new home market.
But there are some headwinds. First, we expect the economy to enter a
mild recession that be at the end of the year, and that will feature some job
losses which will weigh on and demand for housing.
Also, you know, be the impact of tighter
lending standards has yet to be fully felt.
Now, housing. Nancy, I am curious, anytime we talk
about the health of the housing market, we focus on the actual people who live
there. Median yield, the buyers themselves
here. But we know there's also been a big
investment component to our housing market depending on the region.
How much of that factors into your outlook?
It went. Are you talking about an investment firm
from outside individual? Yes.
Yes. Well, I think that's been been a key
factor in the housing market over the last several years and in some ways has
contributed to the shortage. Homes for sale in the existing market
with investors purchasing homes and converting them into rental properties.
I think that there is some evidence, though, that that trend has taken a
little bit of a step back in recent months.
What do you think could actually maybe provide a little bit more of a tailwind
for the housing market? Is it rates coming down, mortgage rates
coming down? Is it just economic stability?
What do you look at? Well, I think that the decline in
mortgage rates would be well, it would give the housing market a huge boost.
Unfortunately, our work at the rates not to come down too much.
And until next year, the rise in rates is really frozen, upbeat, visiting home
market. That market has been plagued by a
shortage of inventory for months. I mean, several years, I'm sorry, coming
out of the global financial crisis. And then the shortage has been
exacerbated the following the sharp end up in rates over the last year.
Many would be sellers have retreated to the sidelines.
Many of many homeowners have mortgage rates at 3 percent.
In some case, that's lower. And it just doesn't make sense unless
you really are in a position where you have to supply your home to do so.
Right now, if you're a buyer who relies on the mortgage,
there's not much motivation to give up your 3 percent mortgage for one.
That's somewhere between 6 and 10 percent that you do.
OK, I'm sorry. Go ahead.
I was used to that very point, Nancy. What does this say about new home
construction as opposed to existing home, as you say?
If I have a 3 percent margin, don't try to trade it in for 6 1/2 percent
mortgage. That means do I want a new home?
And does that really mean that industry will be on the upswing?
We do see it. There's a number of things supporting
new home construction. Again, there's this chronic shortage of
homes. That's the first several years.
There's still a lot of pent up demand. Some of that has been released over the
last couple of years, but there continues to be a lot of demand.
Builders, again, to get back to lending standards.
Builders are seeing some tightening of lending standards.
But I think that the multi-family sector will be impacted more than the single
family sector. And even in the face of of
more restrictive lending, homebuilder sentiment, hopes has improved quite a
bit over the last couple of months. I think one reason is that some of the
supply chain difficulties that had been put off for a while are starting to
resolve. So I do think that there are things
supporting home construction going forward, particularly in the
multi-family sector. But we're not forecasting a repeat of
what we made. Housing starts number which was above
one point six million.