: Home builders will help save America’s sluggish housing market, says Fannie Mae. Now for the bad news.

by | Jul 28, 2023 | Stock Market

The U.S. housing sector is back in full swing and builders are best positioned to ride the wave, Fannie Mae’s
economists say. The housing market went into a recession at the end of 2022, after mortgage rates surged from 4% to 7%, making homeownership more expensive, and depressing home sales. Since then, housing has mostly rebounded, but with the housing market seriously short of homes for sale as homeowners hold out on selling, the sector is still facing a fundamental supply-and-demand problem.

The key players poised to reap the benefits of — and permanently fix — this imbalance are home builders, according to two economists at mortgage-financing giant Fannie Mae. The government-owned enterprise purchases mortgage loans from lenders and either holds them on their books, or packages them into mortgage-backed securities — and sells them to the broader market.  “If they get to that level, that will help absorb current demand pretty well,” Doug Duncan, chief economist at Fannie Mae, told MarketWatch. And now for the bad news. “The question is catching up, and we think that will take two or three years,” he added. “So it looks to us like a pretty good environment for builders for some time,” Duncan said.  Builders have ramped up new construction on homes. In June, builders were on track to complete construction of 1.47 million if they continue at the same pace for the rest of the year.A decade of underbuilding A decade of underbuilding is one reason why the U.S. is facing such a shortfall in housing supply, Duncan explained.  According to Realtor.com, the U.S. is short of 6.5 million single-family homes. Realtor.com looked at household formation between 2012 and 2022, housing starts, and home sales. (Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, also a subsidiary of News Corp.
) During the Great Recession from 2007 to 2009, builders sharply pulled back on new-home construction. Housing …

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