DAYTONA BEACH − The Federal Reserve last week raised its key interest rate a quarter point to the highest level in 22 years, but next year could be a different story, according to the National Association of Home Builders’ chief economist.
Robert Dietz of the NAHB was in Daytona Beach on July 26 to deliver his housing market outlook to a Volusia Building Industry Association lunch gathering at LPGA International. He predicted the Fed could raise interest rates again this fall, but will likely start lowering rates by mid-2024. That should boost sales of both new and existing homes by allowing more first-time homebuyers to afford to take out mortgage loans.
He also noted that confidence levels are already rising for builders nationally. The reason: demand continues to exceed the supply of existing homes on the market.
That’s especially true for Florida and the Daytona Beach metro area, which consists of all of Volusia and Flagler counties, where the population has been growing faster than the national average, he said.
Dietz spoke with The Daytona Beach News-Journal immediately following his talk. Here’s what he had to say:
What’s the main takeaway?
“2024 should be a story of improving housing affordability as builders add more supply in the market and as interest rates settle lower given the end of Federal Reserve tightening.”
You last visited Daytona in 2019. Are you surprised by the growth?
“Yes. It’s really dramatic, given the amount of growth Florida and the local Daytona market have experienced. If you look at population growth rates, it’s been four or five times as fast as the country as a whole. There’s not enough building to keep up with that level of population growth which means that there is more home construction coming down the road.”
What’s your outlook for the Daytona market?
“We’ve seen a fairly big decline in single-family (new home) construction at the start of 2023 that began in 2022 as interest rates moved from 3% up to 7%. But the second half of this year should see the monthly data in terms of single-family construction starts/single-family (building) permits improve. That’s going to result in the calendar year of 2024 (seeing) an outright gain in single-family construction.”
What about apartments?
“Nationwide, construction (of apartment projects) is going to decline. There’s about a million apartments (units) under construction so some softening of activity is going to take place. But locally, the apartment construction data is actually fairly solid. So this could be a local market that evades some of that dramatic slowdown that we expect to happen nationwide. (But) I would expect some leveling off (in the Daytona market).”
VBIA member reacts to Dietz’s talk
Frank Severino of Budd Severino Advanced Home Exteriors in Daytona Beach said he appreciated Dietz’s insights. “Most impactful for me is that 25% of a new home’s cost is government regulation and fees,” he said. “Certainly gives the housing affordability crisis a new perspective.”
Leave a Comment