Supply chain snags still aren’t going away

One of the biggest stories in 2022 for the US economy was that most of the finance world underestimated how difficult it would be for global supply chains to bounce back from the shutdowns of 2020 and 2021.

In December 2021, 90% of builders were telling Zonda that they were experiencing supply disruptions, Wolf says. In December 2022, that number fell to 48%.

“We’re nowhere near pre-pandemic levels, but we’re past the worst point of supply challenges,” Wolf said.

While the price of lumber first skyrocketed and then cooled in 2021, the price of other housing materials increased. Builders struggled to find everything else that a home needs, including the kitchen sink. A third of survey respondents recently told the NAHB that they’re currently experiencing shortages of electrical transformers. Builders told John Burns that windows and appliances are backed up as well, says Finnigan.

“I think we’ll see gradual improvement over 2023” as supply chains strengthen, Finnigan says. “I don’t know if it will be anything close to normal, though.”

Slow and steady improvement in mortgage rates

Mortgage rates started to get better for buyers around five or six weeks ago, but likely won’t drop below 5% in 2023, says Zillow economist Jeff Tucker.

Zillow’s statistics on pending home sales also turned a corner. The number of homes with offers made and accepted was down 32% year-over-year in November, versus a decline of 38.3% in the previous month.

“The trajectory won’t look like a V-shaped recovery but the momentum is no longer pointing in a consistently worse direction,” Tucker says.

Biden’s infrastructure bill may save construction in 2023

The effects of a prolonged housing recession are going to damage the construction industry’s ability to produce more homes in the long run. Already, 18% of homebuilders are telling Zonda that they’re laying off employees, even while the overall construction industry is still adding jobs, Wolf saiys

Spending from the Bipartisan Infrastructure Law will start coming into the economy in 2023, with the biggest employment effects coming in 2024 and 2025, notes Mark Zandi, chief economist at Moody’s Analytics. At its peak, spending from the bill will add 800,000 jobs in construction, manufacturing, and transportation to the economy, according to Moody’s estimates.

“It makes it less likely that we go into a [broad] recession,” Zandi said. “We will be most vulnerable in the second half of 2023, and if we do go into a recession this will make it shorter and less severe.”

📬 Sign up for the Daily Brief

Our free, fast, and fun briefing on the global economy, delivered every weekday morning.