Lawrence Yun shared his economic outlook on Wednesday, saying that despite volatility, the US remains on track for 4-5% growth next quarter.
The Trump administration’s erratic foreign policy has sent shockwaves through the economy in the past 72 hours, devaluing the dollar, rising consumer costs and fueling fears of a recession comparable to the late 1920s and 30s, or even the Great Depression.
Lawrence Yun, chief economist for the National Association of Realtors, sought to allay agent fears in a recent webinar with the Travelers Institute. To that end, he suggested taking a hard look at mortgage rates, buyer and seller psychology, short-term home sales trends, and the health of the job market. He also considered whether some of the recent stock market declines are a harbinger of worse things to come (hint: not, at least not yet).
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Lawrence Yun
“Let’s start with the big picture. Real estate aside, I think the question is whether we’re going to go into a recession,” Yun said, addressing the biggest elephant in the room. “The Federal Reserve Bank of Atlanta [gross domestic product] Next quarter’s numbers suggest we are no closer to a recession. In fact, next quarter’s GDP could be 4%. [to] It’s in the 5 percent range. ”
But Yun was concerned about the risk of another government shutdown at the end of the month, limiting access to key economic indicators.
“Flood insurance is not available in relation to real estate. Some mortgages are not originated. Some rural areas rely on mortgages. [U.S. Department of Agriculture] Getting a mortgage to buy a home with zero down payment is not available, nor is income verification available. [Internal Revenue Service]”So we hope that doesn’t happen,” he said.
Regarding the housing market, Yun said homeowners are in a solid position as home values remain “solid” despite market prices falling due to increased inventory due to increased construction activity. Although market conditions have become sweeter for homebuyers, with incentives offered by builders and private sellers, home sales remain below pre-COVID-19 norms due to stubborn mortgage rates and unsustainable insurance costs.
“This is 75 per cent of normal, which in normal sense means pre-coronavirus 2019,” he said. “We had two years of frenzied activity when interest rates were low, but when the Federal Reserve aggressively raised interest rates and mortgage rates rose to 8%, you see what happened to home sales.”
Interest rates are currently bouncing around the 6% range, which Yun said may be enough to draw more consumers into the market.
“We don’t have those crazy, high-risk subprime loans anymore. Mortgage loan originations are for people who have the ability to repay their mortgages,” he said. “I think there will be more people in favor than against it. So that’s a very good sign. So my prediction for the housing sector is that home sales will recover about 14% this year.”
“The sale of new homes depends on the activity of builders…” he added. He added that the basic assumption is that mortgage rates will be “around 6%, with some weeks at 5.8% and some weeks at 6.3%, but basically an average of 6%. Employment growth isn’t spectacular, but there’s no recession.”
As for the broader economy, Yun said he is focused on artificial intelligence and whether major companies such as NVIDIA, Amazon, Microsoft, Google and Facebook can turn consumer appeal into profit.
“They’re investing heavily in artificial intelligence,” he says. “But the question is, ‘Can they make a profit? Can they make a big, big profit?'”
Concerns also persist about a possible K-shaped economic and stock market correction that could trigger a long-feared recession. Yun said that even if a recession were to come, it would not be like the situation in 2008.
“Based on my conversations with Wall Street analysts and other economists, a correction would not surprise anyone,” he said. “But I think it’s worth considering that if there is a fix, it’s usually an early sign of a problem. [the] The economy could really slow down and fall into recession. ”
“According to the University of Michigan, consumer confidence is not good,” he added. “Consumers are expressing dissatisfaction with the direction of the economy and finances. Interestingly, the numbers in this index are much lower than they were during the 2010 foreclosure crisis, and even lower than that. Now, when you open the lid on this index, it is made up of two components: expectations for the future and consumers’ reactions to current conditions.”
Despite weak sentiment and market headwinds, Yun said real estate can rely on U.S. optimism to weather recent growing pains.
“Americans are optimists,” he said. “Even if today was hard, at least they’re going to wake up and say tomorrow will be better.”
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