A top real estate economist just declared that the housing recession is over

housing crisis foreclosure great recession

REUTERS/Robert Galbraith

  • National Association of Realtors economist Lawrence Yun says the housing recession is over.
  • NAR data released Thursday showed pending home sales rose 0.3% in June compared to May.
  • "The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply."

Pending home sales climbed in June by 0.3%, according to National Association of Realtors data released Thursday, prompting the group's chief economist to declare the end of the US housing sector's downturn.

"The recovery has not taken place, but the housing recession is over," NAR's Lawrence Yun said in a statement. "The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply. Homebuilders are ramping up production and hiring workers."

The Pending Home Sales Index is based on contract signings. Despite its latest monthly increase to 76.8, it remains 15.6% lower than a year ago. A rating of 100 equals the contract activity seen in 2001.

The group expects the 30-year fixed rate mortgage to reach 6.4% this year, and then 6.0% in 2024. This year's near-7% rates has made current homeowners who previously secured lower rates reluctant to move, and it's kept many house hunters sidelined.

Higher rates will weigh on homebuyers for years to come, Moody's researchers said in a separate July note, as central banks will likely keep monetary policy tight for some time. 

Meanwhile, the NAR predicts unemployment will tick higher to 3.7% before the end of 2023, and continue on to 4.1% next year.

"With consumer price inflation calming close to the Federal Reserve's desired conditions, mortgage rates look to have topped out," Yun said. "Given the ongoing job additions, any meaningful decline in mortgage rates could lead to a rush of buyers later in the year and into the next."

In any case, tight housing inventory has prevented any meaningful improvements in affordability. While Case-Shiller data shows that home prices in June saw their steepest annual drop since 2012, they've still climbed for four consecutive months. All 20 major metro markets reported monthly price gains for the third straight month.

The new housing data comes one day after the Federal Reserve announced a 25 basis-point rate hike, bringing the federal funds rate to a range of 5.25%-5.5%. Markets largely expect this to be the final adjustment of the year before policy easing begins in 2024.

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