This year seems to have no end for those who work in the real estate sector. And everything indicates that the panorama will not change much in 2023, but that we will have to wait until 2024 to see any ray of hope.
“We think home sales will bottom out late in the first quarter, buoyed by the nearly 0.75% decline in mortgage rates since the end of October,” wrote Kieran Clancy, a senior economist at Pantheon Macroeconomics. “However, meaningful recovery is still a long way off and home prices may fall much further.”
After an overwhelmingly successful 18 months that spanned from mid-2020 to the end of last year, 2022 has been a year where almost everything went wrong for housing.
The monthly note published on Monday about the builders confidence It became the perfect climax to a nightmare that has lasted for a year.
The December National Association of Home Builders (NAHB)/Wells Fargo Real Estate Market Index, popularly known as “builder confidence,” fell again this month for the 12th time this year.
That means homebuilder optimism got worse every month in 2022.
In the December report, NAHB chief economist Robert Dietz noted that the index’s decline to 31 of 33 in November was the smallest in six months, “indicating that we may be nearing the bottom of the cycle.” when it comes to builder confidence,” Dietz said. Any number above 50 reflects positive confidence in market conditions, but numbers below 50 signal a negative view.
The recent decline in mortgage interest rates from over 7% in November to around 6.3% since last week has helped stabilize the market.
However, noting a smaller than expected drop to a level that marks the lowest figure for the index since 2012 (except for April 2020), perfectly sums up the path of the real estate sector this year.
If psychology is applied, we are moving from shock to denial, anger, bargaining, and now acceptance.
The survey of homebuilders for january It was a knock for the government to take measures aimed at correcting the pressures on the supply chain.
In Aprilthe real estate market reached a “tipping point”.
In the month of juliohomebuilders were halting their projects because the costs of land, construction, and financing were exceeding the expected value of the home.
The light at the end of the tunnel will not arrive until 2024
Now, with 2022 coming to an end, we will have to wait until 2024 to see any change in the real estate sector.
“NAHB expects the weak real estate situation to persist into 2023 and we forecast a recovery in 2024, given the 1.5 million home deficit across the country and lower interest rates expected in the future. with the looser monetary policy to be implemented by the Federal Reserve in 2024,” according to Dietz.
Real estate stocks, better than the market
When it comes to construction stocks, however, the future has materialized in recent months: Since mid-June, the S&P Homebuilders ETF (XHB) is up 15%, versus a 5% gain for the S&P 500.
Construction stocks have largely outperformed the S&P 500 in the past six months as investors begin to bet on a turnaround in the real estate sector for domestic construction companies.
In recent weeks, we have seen the results of Toll Brothers (TOL) y Lenner (LEN) exceeded expectations, especially as builders began to manage their delays; that is, the houses they were building paid for in part by the buyers, and they wait for better conditions to be more aggressive.
However, much of the home construction business does not pass through the hands of the large national construction companies.
Like politics, the vast majority of interactions in real estate occur at the local level. However, smaller local businesses are suffering acutely from this year’s market ebbs and don’t know when that pain will stop.
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