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Keep your seatbelt buckled.
The housing market is likely to face stubbornly low inventory and worsening affordability for at least the next couple of years, predicted CNBC contributor Ron Insana, speaking Saturday at the REALTORS® Conference & Expo in San Diego. Insana also presents the Market Score Board Report for radio.
Until supply chain issues subside, there won’t be a meaningful increase in new construction to help cool escalating home prices, Insana said. At the same time, he added, labor shortages are bound to persist: “Wages are going up for jobs in which people don’t want to go back to work, such as trucking.”
“This is a disruptive period that will come to an eventual end,” Insana said, “but we need [federal] programs to bring supply back to a normal level. We’re short about 5 million homes in the United States.” And while the Federal Reserve is likely to raise its benchmark interest rate next year, “rising interest rates won’t fix this problem—rising supply will.”
A minor recession is possible if the supply problems aren’t fixed, Insana warned.
The Build Back Better Act currently contains funding for a range of housing priorities—from increased fair housing enforcement to programs designed to jumpstart production—but the fate of the bill remains unclear. With political gridlock, “it’s a miracle that anything is getting done,” Insana said, adding that the $1.2 trillion bipartisan infrastructure bill was “too small” because of political infighting. “It’s not going to take much [for Republicans] to flip the House in the midterm elections, and then we’ll go into total gridlock.”
Insana said most workers likely will not return to the office five days a week. That means excess office space will eventually need to be repurposed. He noted that in New York after 9/11, many firms moved out of the Financial District, and many of the buildings they vacated were turned into condos; a similar trajectory is likely for the commercial market as a whole moving forward.