Housing: We’re ‘not looking for much of a turnaround until 2024,’ NAHB CEO says

National Association of Home Builders CEO Jerry Howard joins Yahoo Finance Live to discuss the decline of housing in the United States amid Fed interest rate hikes, regulatory inaction, and recession risks.

Video Transcript

DAVE BRIGGS: All right, let's talk housing. The Fed's aggressive monetary policy to get inflation under control is impacting the housing market. High mortgage rates leading to a decline in demand. US homebuilding fell more than expected last month. Housing starts dropping more than 8% in September. Building permits up slightly at 1.4%. But one of the biggest laggards, a 13% drop in multi-unit projects.

National Association of Homebuilders CEO Gerry Howard joins us now with more on all this data. Good to see you, sir. All this data continues to pour in, showing essentially the same things. We're right around early 2020 levels, pre-- or right when the pandemic took hold. What concerns you the most about what's to come?

GERALD HOWARD: Well, that's an interesting question. I think what concerns me the most is the failure of public policymakers to act to stem the tide of this housing recession. Virtually every reason that we are currently in a housing recession is tied directly to public policy. Whether it's interest rates being raised-- and by the way, those interest rates not only impact the housing consumer, they impact the builder at the frontend of the pipeline as the cost of capital for the builders has gone up to get the loans to acquire the land, develop it, and construct the homes.

It's a double whammy on the cost of capital. We're still having labor problems. We've got to get our immigration situation fixed. We're still having supply chain problems as a hangover from the pandemic. And we're still having regulatory problems, whether it's regulations involving the importation of lumber from Canada, labor regulations, environmental regulations, or simply the reinstitution of the regulations that the Trump administration did away with.

Right now, it's a perfect storm for housing. We're predicting that, well, this year will be the first year since 2011 that we build fewer houses than we did the year before. We're worried about next year. Not really looking for much of a turnaround until '24.

DAVE BRIGGS: That was the kitchen sink approach right there. Your colleague, Jerry Konter, the chairman of the NHA, he said, quote, "With inflation continuing to run above an 8% annual rate since March, it's truly disingenuous of President Biden to hail their progress on inflation without recognizing the cost of it." Do you agree with that sentiment? And what can the president do to fix this situation?

GERALD HOWARD: Well, in fact, we talked with the White House today. They assure us that they are taking the housing situation seriously. Obviously, we'll see what actions they take. This housing recession is being caused by inflation that is a direct result of a supply shortage. The administration can do everything that I just mentioned, correct all those egregious policies, and make it easier to build homes. That'll end the inflation.

SEANA SMITH: Gerry, let's start with labor, one of the things that you just cited in terms of some of the problems that you are facing. It's interesting because I was actually looking at a tweet from an economist that we've had on Yahoo Finance a number of times, Diane Swonk. And she was saying that we could actually see job cuts from homebuilders because of the fact that the backlogs are declining and demand is dropping. But it sounds like, at least from your perspective, that you still can't find the number of workers that you need. Is that right?

GERALD HOWARD: When we are operating in a normal economic environment, we are woefully short of skilled labor. Obviously, when we're in a recession and building slows down, yeah, we're not in the same boat.

But remember, housing has always led the country out of every recession since World War II. If we don't have labor, if we don't have a supply of building materials that can be counted upon to get there on time, we're not going to be able to lead the country out of a recession. And I don't know what other sector of the economy can do it. None has done it since, as I said, World War II.

DAVE BRIGGS: You mentioned a conversation with the White House. How did they push back on your recommendations? And will housing lead us into a recession?

GERALD HOWARD: Well, we're already in one. Housing is clearly in a recession right now. I believe and I think that most economists are now starting to come around that the likelihood of an overall recession is greater every day. Hopefully, and right now, I think people are saying it would be a shallow and a short-lived one. But I think that, yeah, we're headed into an overall economic recession.

I think the White House is very aware of what's going on. To the administration's credit, they noted that we had an affordable housing issue, and we also had a housing affordability issue-- two distinct problems. They've noted that from the time they were campaigning, but I think the time to put it on the front burner. And that's what they need to do, is put housing on the front burner, of all the domestic policies.

SEANA SMITH: Gerry, as it stands right now, just in terms of what is the biggest problem facing housing industry, is it more of a demand problem? Is it more of a supply problem? What do you see, at least right now, today?

GERALD HOWARD: Right now, it's probably about 50/50. Interest rates have definitely driven demand down. But we still have a major supply problem, which is why, unlike during the Great Recession, when you saw house prices completely plummet, there's sort of a buffer this time in that there's not enough of a supply for housing values to go all the way down into the tank. It's going to be a unique situation we're facing right now.

DAVE BRIGGS: But Gerry, by some respects, it's still relatively healthy because we're seeing prices still increase. It's just the rate of increases cooling. Where will prices get to? Do you believe we're talking 2019 pre-pandemic levels?

GERALD HOWARD: If they got there, that would be about as low as I think they get.