Single-family housing is going ‘to have a soft landing, solidify, strengthen’ for next year: NAHB CEO

National Association of Home Builders CEO Jerry Howard joins Yahoo Finance Live to discuss the state of the housing market, the latest housing data, and the rental outlook in 2023.

Video Transcript

DAVE BRIGGS: US housing starts declined in December for a fourth consecutive month, hitting its lowest level since July. Let's talk about what's ahead for housing with National Association of Homebuilders CEO Jerry Howard as part of our real estate report brought to you by Intuit TurboTax. Good to see you, sir. Interesting to see this dynamic, the decline driven by a drop in multifamily, while single family projects actually rose. Your reaction to the data and the dynamic that you see on the screen there?

JERRY HOWARD: Well, the single family increase is one that we're really looking forward to, and it's reflected in the new home index that we put out every month, going back up for the first time in 12 months. So single family, we think, is going to sort of have a soft landing, solidify, and strengthen so that by the end of next year, we-- or by the end of this year, the beginning of next year, we think we're going to be in pretty good shape on single family.

Multifamily is another question here. Part of it is the amount of building we've had over the past few years. We've done very well in multifamily. And the other part of it is the administration is now talking about putting in rent controls. If there's anything that's going to stop the construction of multifamily housing, it's putting in rent controls. So I think you're going to see multifamily lag behind and stay in a decline a little bit, but single family will strengthen and we're looking forward to this time next year, a pretty solid single family market with multifamily lagging a little bit behind.

SEANA SMITH: And Jerry, the homebuilder confidence index that you put out earlier this week rising for the first time in a year. Do you think it's safe to say that the housing market has hit a turning point, or how are you looking at that improvement in the report?

JERRY HOWARD: Look, I'd love to say that, but it's only one month. One month does not a trend make. We are hopeful that we'll continue to see a sort of a stabilization and a soft landing. But I want to wait and see another month. It's a nice solid rise, four points, after declining for 12 straight months. But to put it into context, last year, at this time, we were at 83. This year, we're at 35. Big difference. We still got a ways to go, but there's reason for optimism.

DAVE BRIGGS: And mortgage rates, I think, give people a little more sense of optimism, down to 6.15, third straight week they have declined. Do you see that continuing? And where do you believe that number flattens out later this year?

JERRY HOWARD: I do think we're going to see a continued decline in mortgage rates. We're very, very optimistic that the Fed is going to slow down its tightening. And we think that we're going to end up maybe a little bit below five this year. And that's very important. It's also important to remember the cost of capital at the beginning of the pipeline. The cost of capital for builders, when they're buying the land, when they're improving the land, is also coming down, and that's crucial as well.

SEANA SMITH: Jerry, you said below five. That was the lowest that we've heard from anyone over the last couple of months. Given that, the fact that you think it's going to fall so significantly from where it is today, I guess what level do you think it needs to drop to in order to spur some of that activity that we've long been waiting for?

JERRY HOWARD: Well, I'm wishing for that. If it gets below five, I think you're going to see a real jump in housing starts.

DAVE BRIGGS: Yeah, that would be a real surprise, and certainly, unfreeze, thaw things out a little bit. The particular regions you are optimistic about in terms of building and that inventory number beginning to come up this year?

JERRY HOWARD: Well, you know, you're always optimistic about the regions of the country that are pro-growth, the regions of the country that eliminate, or at least reduce, the regulatory burdens that builders and business people have to face. So what am I talking about? Talking about Florida, talking about the Carolinas, Texas, places like that.

SEANA SMITH: Jerry, remodeling. Market sentiment there weakened in the fourth quarter. People aren't moving, and I guess people aren't remodeling their homes, at least at the rate that we had seen. It's still, though, in positive territory. When do you expect that to tick back up?

JERRY HOWARD: Well, when interest rates go down, remodeling also ticks back up. So we're looking for a relatively strong remodeling market throughout the entirety of this year.

DAVE BRIGGS: And overall, just your prediction-- your biggest prediction for where real estate is headed in 2023?

JERRY HOWARD: Well, as long as we can get the supply chain fixed-- and it's been a slow slog getting it back to normal. If we can get the supply chain fixed, I think you're going to see the latter part of this year, a real turnaround in new home construction on the single family side. And I think if we can get the supply chain fixed, it will help cushion the blow on the multifamily side. Right now, cost of capital is coming down. It's about two things-- supply chain and regulation.

SEANA SMITH: Jerry, you're not only talking to those within the industry. I know you also have a regular dialogue with policymakers, with the Biden administration. What are you hearing from them? And I guess what would you like to see happen in order to better assist the recovery in housing?

JERRY HOWARD: Well, I would like to see the Biden administration, if they're not going to be inclined to decrease the federal regulatory burden, I would like to see them put out some sort of incentives for state and local governments to decrease their regulatory burden on builders. That's number one.

Number two, I'd like the Biden administration to understand that when you're talking about rent control, there are at least a half of the landlords in this country are small business people who make their living solely by the rental properties they have. Those are the same people that spent their own money to keep their tenants in their buildings during the pandemic, during the Great Recession. They're as not as much of a problem as they're making out, and they need to be very careful, or they're going to cause a worse problem in multifamily.