Ahead of the highly anticipated Federal Reserve rate decision on Wednesday, CEO and President of the National Association of Home Builders (NAHB) Jim Tobin joins Yahoo Finance Live to share his insights on the outlook for the housing market.

Tobin expresses optimism, describing 2024 as "this pivot year," where he expects rates to come down and demand to start rebounding in the housing market. He believes "the economy will keep moving along at a nice pace," with rates potentially declining in the second half of the year. While acknowledging concerns about shelter inflation, Tobin encourages "people to get used to the new normal" of mortgage rates, rather than hoping for a return to the 3-4% range.

Addressing the costs of new home construction, Tobin attributes the challenges to the inability to keep up with demand. He notes that "price spikes," especially with lumber (LBR=F), occurred "right after the COVID lockdowns when homebuilding really got going." However, he cautions that lumber companies are not "getting ready for a surge in demand," and if this demand does return, it could create "a supply crunch," forcing lumber companies to play catch-up, ultimately leading to higher construction costs.

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

BRAD SMITH: Well, US homebuilding bouncing back in February. The new residential construction jumped 10.7% in February from the month prior to an annualized pace of more than 1.5 million units. That's according to the Commerce Department. While home affordability continues to be a challenge for many Americans, the expectation the Fed could cut interest rates this year is making people more optimistic that we could be in a buyer's market.

So for more on the housing sector, we're joined by Jim Tobin who is the National Association of Home Builders' chief executive officer and president. The NAHB has had some news of its own this week. We'll dive into that, of course, here, Jim. But what more noticeably are you seeing in this environment? And are we set up for a shift in the sentiment out there?

JIM TOBIN: Good morning. Yeah, I do think we are set for a shift in sentiment. I see optimism. We were just at our annual trade show just a couple of weeks ago, and the vibe amongst all the attendees was optimism.

I really think they are looking at 2024 as this pivot year where we come out of the high interest rate environment. Hopefully, we'll see some of those Fed rate cuts through the course of this year, but really, demand starting to come back. And, of course, our members are ready to respond by building more homes and apartments.