New construction starts have been trending higher in recent years, but a lack of workers, a dearth of available land, and a shortage of and higher prices for building materials have made a rapid rebuilding of supply challenging.
“With the Federal Reserve in the later stages of its rate-hiking cycle, we expect the worst of price decreases and sluggish sales and starts to be behind us,” Hirt said. “Recent data on home sales and starts are supporting this view, where we have seen what appears to be a bottoming already underway.”
"Even when interest rate volatility subsides, we expect that mortgage rates will remain elevated in a range around 5%, which will continue to act as a hurdle to supply,” Kresnak said. “However, we’ve estimated that tight supply will keep home prices from falling as much as they might have otherwise—to a 5% year-over-year decline at most—which could encourage more housing starts.”
That, along with supportive demographic trends and strong borrower fundamentals, should put housing on the path to becoming an economic stabilizer, with negative contributions to GDP since mid-2021 turning positive by 2024.