NAHB Chief Economist Warns Against Land Purchases, Rising Mortgage Rates

This will be the best year for economic growth since 1984, but the overview is not completely rosy, says National Association of Home Builders economist Robert Dietz in a recent podcast.

For starters, the next year-and-a-half will be a good run for the housing market, but don’t over purchase land as we get closer to 2023, he warns.

Also right now, the nation has 340,000 workers in construction and as overall unemployment goes below 5% it will be increasingly difficult to get more workers into the space, Dietz notes. 

Dietz points out that right now mortgage rates are 3% but that he and other economists expect them to get to 4%. If they get up to 4 and-one-quarter, it could stifle demand, Dietz cautions, saying that a little change in interest rates can have a significant impact on demand.

The NAHB executive says home builders should be wary of markets that have become unaffordable for first time and first-generation buyers, noting 16 of 20 least affordable markets are in California.

He also expresses increasing concern over new markets that have become unaffordable such as Boise, Idaho where demand and prices have climbed.

In May, Dietz said that higher home prices, longer construction times, and an expected rise in interest rates would price some prospective home buyers out of the market this year despite the strong economic growth and a continued improvement in the labor market.

Not coincidentally, that same month NAHB also predicted a gain in multifamily starts this year. “The (Multifamily Production Index) reversed trend and rose strongly in the second quarter of last year, one quarter before a similar turn-around in the multifamily housing starts data. Since then, multifamily starts have mirrored the MPI. The surge that we saw in the MPI for the first quarter of 2021 coincides with a similar surge in multifamily starts to a seasonally adjusted annual rate of more than 450,000 units.”