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Does Rebounding Home Builder Confidence Signal an Upcoming Economic Growth Cycle?

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Does Rebounding Home Builder Confidence Signal an Upcoming Economic Growth Cycle?

Despite falling demand from priced out buyers, home builders remain optimistic about the year ahead, and experts say that rising sentiment may point toward a breakout year for a recovering economy

February 1, 2023
Home builder with hard hat on desk reviewing projections and data
Image: stock.adobe.com

Falling home sales highlight a steep drop in consumer sentiment as a result of rising inflation and economic uncertainty, but a gradual increase in home builder confidence points toward perhaps a breakout year for the housing market in 2023. After a dip in buyer activity at the close of 2022, those still searching for homes are finding an excess of for-sale inventory, but in order for the housing market—and the economy at large—to gain momentum, the Federal Reserve must slow or pause its rate hikes, Forbes reports.

Second, a negative GDP growth quarter will be needed to shift buying decisions, but once borrowers are back in the game, home builders can prepare for a strong year of sales and new development.

First, an end to the Federal Reserve interest rate raising, so mortgage and all other rates can establish themselves as financial companies, investors and borrowers gain confidence through reduced uncertainty.

Second, a shift to negative inflation rates for food, fuel and utilities. "Pricing power" and special conditions allowed these companies to push prices up. Consumer shifts in buying decisions along with competition should now start a downtrend - particularly in this negative GDP growth quarter.

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