ESR Group Forecasts Recession in 2023 with Subdued Home Sales and Mortgage Originations
In the U.S., economic conditions for the start of 2023 have been relatively positive, with consumer spending, the labor market and mortgage rates all showing signs of strength. However, many economists believe that a recession is likely to come, and the ESR Group agrees; a soft landing is unlikely, and the group expects a modest recession to begin in the second quarter of 2023.
The ESR Group expects existing home sales in 2023 to remain subdued, but notes that recent mortgage application data came in stronger than expected, indicating that the year will start off with an increased level of housing activity. Despite this bump, total home sales in 2023 are expected to reach 4.67 million units, the slowest annual pace of sales since 2011. The group also expects housing starts activity to soften, as there is an elevated number of new homes already under construction or completed.
The group’s forecast for overall single-family mortgage originations in 2023 is $1.69 trillion and $2.03 trillion in 2024, a substantial contraction from the estimated 2022 volume of $2.36 trillion. The Fed could be more hawkish on interest-rate hikes than investors prefer, and this could increase the odds of a U.S. recession. The higher the Federal Reserve raises its Fed Funds target, the greater the risk of a weak link in the global financial system failing under the strain.
Ultimately, the ESR Group does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. However, the data and analyses provided indicate the potential for a recession in 2023, and the resulting impacts on housing and mortgage originations, if the current economic trends continue.
0. “A recession could be ‘deeper than expected' this year, says analyst—here's what it means for your money” CNBC, 18 Feb. 2023, https://www.cnbc.com/2023/02/18/what-a-deeper-than-expected-recession-means-for-your-money.html
1. “Economy Off to Surprisingly Strong Start in 2023, But It's Not Expected to Last” Yahoo Finance, 21 Feb. 2023, https://finance.yahoo.com/news/economy-off-surprisingly-strong-start-133000384.html
2. “Economy and Housing Begin Year on Strong Footing, But It’s Not Expected to Last” Fannie Mae, 21 Feb. 2023, https://www.fanniemae.com/research-and-insights/forecast/economy-and-housing-begin-year-strong-footing-its-not-expected-last
3. “Watch Out, Investors: Warren Buffett Appears to Be Betting on a Recession” The Motley Fool, 21 Feb. 2023, https://www.fool.com/investing/2023/02/21/watch-out-investors-warren-buffett-appears-to-be-b/
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