Housing Market Briefing (Hosted by MIC)-Housing Market Briefing (Hosted by MIC) Slides

Housing Market Briefing (Hosted by MIC) Slides

Pdf Summary

The June 3, 2025 briefing by the American Council of Engineering Companies and NAHB highlights long-term concerns for the U.S. bond market and housing sector amid evolving economic conditions. GDP growth has slowed to forecasted annual rates between 1.2% and 1.8% for 2025-2027, with a recession risk rising to 30%. Economic policy uncertainty is near multidecade highs, only surpassed during the COVID era, fostering consumer caution with personal saving increasing and spending pulling back. The labor market is slowing due to elevated interest rates, though employment remains above pre-pandemic levels in most states.<br /><br />Inflation remains a concern, particularly driven by shelter costs outpacing overall consumer prices, though the cumulative inflation rate peaked post-pandemic and is now easing. The Federal Reserve has begun a monetary easing cycle with multiple rate cuts starting in late 2024, yet long-term mortgage and treasury rates remain elevated, maintaining mortgage rates in the 6-7% range. Meanwhile, growing government deficits and public debt as a percent of GDP signal fiscal sustainability concerns despite low unemployment.<br /><br />Supply-side factors show easing material constraints but persistent shortages in labor and lots, with skilled labor shortages ongoing despite net gains in residential construction jobs. Regulatory costs for new homes have grown significantly, totaling nearly $94,000 per home and contributing to housing affordability challenges. Although lumber prices are declining after a peak in 2022, residential construction loan growth has contracted, and lot shortages remain at historic highs.<br /><br />Housing starts have stalled for single-family homes, with moderate gains expected only in later years. Townhouse construction is increasing with market share at a multidecade high, while multifamily housing construction has sharply declined. Residential remodeling shows positive growth prospects and is gaining market share. Demographic trends indicate solid housing demand emerging from younger generations entering prime homebuying ages.<br /><br />Challenges include stubbornly high interest rates, debt-pressured buyers, increased competition, and development risks related to complex deals and regulatory approvals. Positives include a stable housing economy foundation, steady employment growth, manageable costs, and pent-up buyer demand. Land prices remain steady with some easing in lot development costs, though careful monitoring of development activity and financing is ongoing.

Keywords

U.S. bond market

housing sector

GDP growth forecast

economic policy uncertainty

inflation and shelter costs

Federal Reserve monetary easing

mortgage rates 6-7%

housing affordability challenges

residential construction trends

demographic housing demand