Lawrence Yun shared his economic outlook Wednesday, saying that despite volatility the U.S. is still on track for 4 to 5 percent growth next quarter.
Inman Connect
Invest in yourself, grow your business—real estate’s biggest moment is in San Diego!
The past 72 hours have sent a shockwave through the economy, as the Trump Administration’s volatile foreign policy stokes fears of a devalued dollar, higher consumer costs, and a recession — or depression — that would rival that of the late 1920s and 30s.
In his latest webinar with the Travelers Institute, the National Association of Realtors Chief Economist Lawrence Yun attempted to alleviate agent fears. And to do that, he offered a tempered review of mortgage rates, buyer and seller sentiment, near-term home sales trends, and job market health. He also weighed in on whether several recent stock market dips are the precursor to something much worse (Hint: It’s not, at least for now).
TAKE THE INMAN INTEL INDEX SURVEY
Lawrence Yun
“Let’s first start with the very big picture. Aside from the real estate, I think there’s a question about whether or not we are going into an economic recession,” Yun said, addressing the biggest elephant in the room. “The Atlanta Federal Reserve Bank, which tracks the [gross domestic product] number for the upcoming quarter, is implying that we are not anywhere near recession. In fact, the next quarter GDP reading could be in the 4 percent [to] 5 percent range.”
However, Yun was concerned about the risk of another government shutdown at the end of the month, which would limit access to key economic figures.
“Related to real estate, flood insurance is not available. Some mortgages are not originated. Some of the rural community, which depends upon the [U.S. Department of Agriculture] to get a mortgage to buy a home with a zero down payment, would not be available, or income verification from the [Internal Revenue Service],” he said. “So we hope it doesn’t happen.”
As for the housing market, Yun said homeowners are in a solid spot, as national home values remain “on solid ground,” despite price declines in markets experiencing an inventory boost from heightened builder activity. Although market conditions have sweetened for homebuyers, with builders and individual sellers offering incentives, home sales are still below pre-COVID norms due to stubborn mortgage rates and untenable insurance costs.
“It is 75 percent of normal, normal meaning 2019 pre-COVID,” he said. “We had two years of frenzied activity when interest rates were low, but when the Federal Reserve aggressively raised interest rates, mortgage rates going up to 8 percent, you see what happened to home sales.”
Now, rates are bouncing within the 6 percent range, which Yun said might be enough to pull more consumers into the market.
“We don’t have those funny, risky subprime lending anymore. Mortgage origination is for people who have the ability to repay mortgages,” he said. “I think more people will get approval rather than denial. So this is a very good sign. And consequently, my forecast on the residential side is that I think home sales will recover about 14 percent this year.”
“New home sales will depend upon builder activity…,” he added. He went on to note that his underlying assumption is that mortgage rates will be “hovering near 6 percent, maybe some weeks 5.8 percent, other times 6.3 percent, but essentially 6 percent average. Job gains, not spectacular, but no recession.”
As for the broader economy, Yun said he’s keeping his eye on artificial intelligence and whether the major players — NVIDIA, Amazon, Microsoft, Google and Facebook, etc. — will be able to turn consumer fascination into profit.
“They’re investing heavily in artificial intelligence,” he said. “But the question is, ‘Can they turn a profit? Big, big profit?'”
There are also ongoing concerns about a K-shaped economy and potential stock market correction, which could trigger a long-feared recession. If a recession does come, Yun said, it won’t look like 2008.
“Based on my conversations with some Wall Street analysts and other economists, no one will be surprised if there is a correction,” he said. “But I think it is worth considering that if there is a correction, usually that is an early sign that [the] economy could truly slow down and go into a recession.”
“The Consumer Sentiment Index, according to the University of Michigan, is not good,” he added. “Consumers are expressing displeasure about the direction of the economy and their finances. So interesting that the index number is way, way down, even below what it was in the 2010 foreclosure crisis. Now, if you open the hood on this index, it is comprised of two components: future expectation and consumers responding to the current situation.”
Despite weak sentiment and market headwinds, Yun said he’s banking on American optimism to push real estate through the latest round of growing pains.
“Americans are optimists,” he said. “Even if today is difficult, at least they are willing to wake up to say that tomorrow will be better.”
Email Marian McPherson
Topics: homebuying | homeselling | recession Show Comments Hide Comments Sign up for Inman’s Morning Headlines What you need to know to start your day with all the latest industry developments Sign me up By submitting your email address, you agree to receive marketing emails from Inman. Success! Thank you for subscribing to Morning Headlines. Read Next
Homebuyers don’t need motivation. They need leadership
Buyers are returning, sellers are 'increasingly realistic about pricing': Pam Liebman
Improving rates just drove a 'big week' for mortgages
What did Trump say about housing and mortgage rates at Davos?
More in Markets & Economy
Pending sales sink as buyers 'wait and see' for spring
Use these 3 major mortgage shifts to generate listing and buyer leads
What did Trump say about housing and mortgage rates at Davos?
Buyers are returning, sellers are 'increasingly realistic about pricing': Pam Liebman
Read next
Read Next
Agents steer buyers to homes with better commissions, study claims
The ULTIMATE real estate agent business plan for 2026
Homebuyers don’t need motivation. They need leadership
What did Trump say about housing and mortgage rates at Davos?