While inflation, economic uncertainty and other headwinds persist, the nation’s housing and remodeling markets should experience a positive turn as 2023 continues to unfold, with a more robust recovery anticipated in 2024, housing experts say. Among the key statistics and forecasts released in recent weeks by government agencies, research firms and industry-related trade associations were the following:
HOUSING STARTS & NEW-HOME SALES
A modest decline in interest rates helped end a string of 12 consecutive monthly declines in builder-confidence levels, although sentiment remains “in bearish territory” as builders continue to grapple with elevated construction costs, building material supply chain disruptions and challenging affordability conditions, according to the National Association of Home Builders (see related graph above). Although the NAHB is forecasting weaker housing conditions to persist in 2023, “it appears that a turning point for housing lies ahead,” said Robert Dietz, chief economist for the Washington, DC-based trade association, which is forecasting a housing recovery in 2024. “In the coming quarters, single-family home building will rise from cycle lows as mortgage rates are expected to trend lower and boost housing affordability,” Dietz observed. Housing production is currently running below a rate of 1 million units annually, as high construction costs and elevated interest rates continue to present affordability challenges.
With mortgage rates declining, “homebuying activity should inevitably rebound in the coming months,” according to the chief economist for the National Association of Realtors. Lawrence Yun of the Washington, DC-based NAR noted that there are approximately two months of lag time between mortgage rates and existing-home sales, which fell sharply in 2022. Resales are projected to decline 6.8% in 2023, with 4.78 million existing homes expected to be sold, Yun predicted. Some 5.13 million existing homes were sold in 2022. After eclipsing 7% in late 2022, Yun said he expects the 30-year fixed mortgage rate to settle at 5.7% this year, as the Fed slows the pace of rate hikes to control inflation. “The upcoming months should see a return of buyers, as mortgage rates appear to have peaked,” he observed.
Residential remodelers “remain positive” about the market, although a significant number have “seen inflation take a toll on consumer budgets, causing many to pull back on projects,” the National Association of Remodelers reported last month. The Washington, DC-based NAHB released its NAHB/Westlake Royal Remodeling Market Index (RMI) for the fourth quarter of 2022, posting a reading of 66, down 17 points compared to the fourth quarter of 2021. “Although the RMI was down sharply, it’s encouraging that it remains in positive territory,” said NAHB Chief Economist Robert Dietz, adding that he expects remodeling activity to “experience a slowing nominal growth rate, but to start to pick up by the end of 2023 as interest rates on home improvement loans begin to trend downward.”
MAJOR APPLIANCE SHIPMENTS
With supply chain disruptions, inflation, home-sales declines and other market headwinds taking a toll, domestic shipments of major home appliances posted a significant decline in 2022, falling below shipments during the same 12-month period in 2021, the Association of Home Appliance Manufacturers reported. According to the Washington, DC-based AHAM, major appliance shipments totaled 79.8 million units in 2022, down 7.9% from the 86.6 million units shipped in 2021. Contributing to the year-long decline was a 9.7% dip in domestic appliance shipments during the fourth quarter of 2022 compared to the same period year earlier. 2022 declines were posted in all key product categories, including home laundry equipment (-12.1%), cooking (-4.6%), kitchen cleanup (-4.0%) and food preservation (-3.3%), AHAM reported.
Angi Report Points to ‘Shift in Value’ for Today’s Homes
DENVER — A major result of the COVID-19 pandemic is that today’s homes have “a different value” to homeowners than prior to the outbreak of the public-health crisis, according to a report issued by Angi, the Denver-based home services website.
Angi’s 2022 State of Home Spending report found that a significant majority of surveyed homeowners said they currently value their homes more than they did prior to the start of the pandemic.
Representing a major shift in recent years, the top reason for completing a home-
improvement project in 2022 was to make the home better suited to changing lifestyle needs, according to Angi. The second-leading reason was to get personal enjoyment out of an updated home. Prior to the start of the pandemic, return on investment or other financial reasons were consistently the top motivator for improvement spending, Angi said.
“Our homes now have a different value, providing us with more than a financial return,” said Angie Hicks, chief customer officer for Angi, adding that the shift in the perceived ‘value’ of homes “will have a lasting impact on home improvement moving forward.”