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Likening current economic conditions to "Recession Roulette," home building industry veteran Chuck Shinn of Builder Partnerships, an organization working to connect builders, manufacturers, and others in the home building industry, assesses where we stand today, offering insights into the state of the U.S. economy, existing-home and new-home sales, and housing demand, and what's in store for home building in the future.
While Shinn points out that the U.S. economy and housing industry have performed better than expected so far in 2023, he sees signs of weakness in the economy and housing due to the overall effects of the Federal Reserve’s continuing battle against inflation. He points out that the manufacturing sector of the economy is also weak—especially durable goods—and that the consumer confidence index has dropped below the average level of 2022, with both the present situation index and the future expectation index declining at levels associated with a recession.
The U.S. treasury yield curve has been inverted since last October. Short term interest rates are higher than long term interest rates, which historically has been a very reliable indicator of an economic recession occurring within six months to 18 months. The forecast for a recession continues to get pushed into the future. Currently, economic forecasters are predicting a recession late this year or in the first half of next year. Most forecasters now believe the recession will be mild and brief. Others are talking about a rolling recession through the economy. If it is a rolling recession, housing may have experienced its recession during the fourth quarter of last year when the Freddie Mac 30-year mortgage interest rate rose to 7.08% in October, up from 3.05% at the beginning of 2022. If this is the case, housing is in a recovery.
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