WASHINGTON, DC — The Federal Reserve’s most recent interest-rate hike was “unnecessary” and hurt both regional banks and the housing market, the chief economist for the National Association of Realtors said last month.
Speaking at the 2023 Legislative Meetings of the Washington-based NAR, Chief Economist Lawrence Yun said that he expects the Fed will stop raising interest rates further, noting that inflation has already started to slow down and will wind up close to 3% by year’s end.
Yun said that new-home sales are back to pre-pandemic levels, although existing-home sales are historically low and housing inventory is down 40% from 2019 levels.
“The housing market is being held back by a lack of housing inventory, a problem that existed before the pandemic,” Yun said. “We have to stop the bleeding before improvement takes place. We need to get more inventory, and the long-term solution is more home building.”
Yun said that housing prices have risen dramatically because of the housing shortage, but added that recent price declines are temporary.
“Home price increases are naturally good for homeowners,” the NAR economist said. “Everyone participates in wealth gains if you’re a homeowner.”
Yun forecasted that mortgage rates will fall closer to 6.0% in 2023 and decline below 6.0% in 2024. He added that he expects new and existing-home sales to bottom out in 2023, before an upturn in 2024.