Colorado Springs—Day one of the 2023 North American Association of Floor Covering Distributors/North American Building Materials Distributors Association (NAFCD + NBMDA) convention kicked off here with valuable networking activities and relevant seminars and educational sessions.
One of the highlights of the first full day of the conference was a keynote presentation by a very familiar face at NAFCD: Connor Lokar, senior economist with ITR Economics. Known for its high accuracy rate in economic forecasting—particularly in bellwether sectors such as housing, construction and building materials—ITR aimed to address attendees’ concerns about the state of the economy heading into 2024.
All eyes, of course, are on the housing market, particularly housing starts. Defined by ITR Economics as a “leading indicator,” single-family housing continues to be hamstrung by high mortgage interest rates (a by-product of stubbornly high inflation), low inventories and low housing starts. But the silver lining in all this, according to ITR, is we may have already seen the bottom.
“The housing market is actually starting to recover,” Lokar told the jam-packed audience. “When I spoke at this conference last year, the market was in freefall, trending negative and was getting worse by the week. As of the third quarter this year, we’re starting to see single-family housing starts beginning to turn the corner.”
However, the term “recovery,” by ITR Economics’ standards, means conditions are becoming worse less quickly. “We’re not posting monstrous increases year over year, but we’re seeing some favorable conditions compared to this time last year. Many of you in the audience today have probably had an ‘OK’ year so far.”
Lokar also cited issues of concern on the multi-family side of the business. He shared statistics showing starts in this particular sector of the market are down 28.1% points in the last three months alone. At the same time, he said the existing new home construction market has stalled as builders continue to face pricing pressures.
“We need the housing market to come back to life—to be more dynamic,” Lokar told attendees. “But that all depends on interest rates. The rate threat remains a concern.”
While the Federal Reserve has held rates steady during its past few meetings, that doesn’t necessarily mean we’re going to see a dramatic turnaround when the calendar turns to 2024. “We expect marginal reductions in mortgage interest rates in 2024, but not the 2.5% rates we had back in 2019-2020. You’re probably looking at more like 6%.”
(Look for more on Lokar’s presentation as well as other highlights from the 2023 NAFCD+NBMDA conference in the next edition of FCNews.)