2024 is signaling a 'housing renaissance': NAHB CEO

Thu, Jan 18, 2024, 2:56 PM

Housing starts dipped in December while permit growth continues, which National Association of Home Builders CEO Jim Tobin told Yahoo Finance signals a "housing renaissance" ahead in 2024. He believes the data shows the housing market pivoting into an era of "great growth" after a drastic post-COVID slowdown.

Though mortgage rates remain high, Tobin expects rates to lower in six months as traffic rises at model homes, indicating renewed spring homebuyer demand.

"The world is getting ready to realize that we're no longer gonna back those three and four percent mortgage rates," Tobin tells Yahoo Finance, adding: "and there's gonna be a generational shift here that mortgage rates at five [percent] in the long term are still really good low rates."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

- We got lots of housing data out today. Building permits continue to rise, but housing starts trending down for the first time in four months. Builder sentiment keeps surging, but not necessarily when it comes to single family housing. So to make sense of the highs and the lows in today's data, we've got the perfect guest on this, the CEO of the National Association of Home Builders, Jim Tobin.

Jim, thank you so much for coming on our show today. I know that in 2022, after a big drop in homebuilder sentiment, you said that we were heading towards a housing recession. After all of today's data, how would you describe what we're heading towards?

JIM TOBIN: I think we're heading towards a housing renaissance. I think 2024 is shaping up to be that pivot year where we leave the doldrums of the post-COVID slowdown, and we really pivot into the next five or six years in the housing market, where we're going to see some great growth. We're going to see homebuilders meet that pent-up demand for single family and multifamily housing.

So I'm very optimistic. The headline numbers that we saw when it comes to starts and sales and permits, I think we have to understand we had some bigger numbers earlier this year in the late half of 2023. And now we're looking for '24 to really take off.

JOSH LIPTON: And Jim, let's talk about affordability, though, as an issue. I'm looking at the 30-year fixed here, Jim. According to Mortgage News Daily, it says it's now at 6.89%. I mean, it's better than 8%, Jim, but it's still higher than a lot of people are used to. How does that impact demand, Jim? And where do you see that headed from here? Where are we in six months?

JIM TOBIN: I think in six months, we're going to see mortgage rates even lower than we are now. We watch the Freddie Mac numbers, and they are showing that we are closer to 6 and 1/2 than we are to 7, which is a good sign. We're already starting to see across the country that people are coming off the sidelines, as you are-- the NAHB Wells Fargo Housing Market Index, which came out yesterday, the biggest jump in that component-- we moved up 7 points in total, but the biggest component jump was in traffic, which means people are starting to get out of their homes and get into model homes to look at housing, maybe setting themselves up for a spring buying season, readying themselves for those lower rates.

So I am encouraged by the trend. We're down, just over the last couple of months, we're down over a full percentage point in mortgage rates. And then when you couple that with builder incentives, people are getting actually below 6%, whether it's mortgage rate buydowns or price cuts. Our builders are doing everything they can to get those buyers that are in the marketplace into those new homes.

- So I'm curious about exactly what you just said, that rates are going to be lower in the next six months. Where are you seeing evidence that people aren't holding on to their mortgages, holding on to homes in anticipation of lower rates in those next six months?

JIM TOBIN: Well, I think that it is-- the world is getting ready to realize that we're no longer going to back those 3% and 4% mortgage rates. And there does need to be a generational shift here that the mortgage rates in the 5 for the long-term are still really good low rates for a long-term investment like your home. So I think people are going to recognize that. Again, 6 might not be quite the number they're looking for.

But they're going to start moving off those sidelines. I'm convinced of that, especially as you start getting down lower towards that 6. And again, with incentives, where there's government programs that can help people get into homes, I really think that we're going to start unlocking those people that are rate locked in their existing homes. We're going to start freeing up the existing home supply, which is going to further add to what the home builders are putting on the market now.

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2024 is signaling a 'housing renaissance': NAHB CEO

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