Thelife- Sheryl Palmer, CEO of Taylor Morrison, says the US is already in a housing recession.
- New residential construction data shows homebuilding activity declined significantly in November.
The US housing market is cooling much faster than some experts had predicted earlier this year, and there are signs that more trouble is on the horizon as we enter into 2023, the head of one of America's largest homebuilders has warned.
Sheryl Palmer, the CEO of Arizona-based Taylor Morrison, told CNBC's Squawk Box on December 20 that the US has been in a housing recession for "many months" as rising interest rates and ongoing supply chain disruptions continue to depress homebuilding activity and homebuying demand alike.
In 2023, Palmer said homebuyers should expect overall inventory volumes to drop as buyers scoop-up existing homes. This could push home prices up modestly, she added, although it could also present new opportunities for buyers to re-enter the market because inventory levels are still above where they were at the beginning of 2022.
"At the beginning of this year, there was really no choice for the consumer," Palmer said. "It was difficult for them to secure a home, and it didn't matter if we were talking about the resale market or new. Today, consumers can really build the home of their dreams and homebuilders are helping them do that."
To further bolster her point, Palmer pointed to the most recent residential construction data from the US Census Bureau. The data shows that nation-wide building permits and housing starts in November declined by 22.4% and 16.4%, respectively, over the last 12 months.
Regionally, the slowdown has been felt most in western markets, which is one of Taylor Morrison's largest focuses. Combined single-family and multifamily starts decreased by 7% year-over-year out west, while building permits were 6.5% lower, according to the Census Bureau.
Meanwhile, data from the National Association of Homebuilders shows that builder sentiment — which asks homebuilders to rate the current market conditions as well as their expectations for the next six months — dropped to a 12-month low in December because of deteriorating housing affordability.
Palmer's comments come on the heels of other business heads who expect the US housing market to have a tough year in 2023. RH CEO Gary Friedman told investors during a third quarter earnings call on December 8 that the housing market is collapsing "at a level I haven't seen since 2008."
But not everyone agrees that the US housing market is in a recession, or that it will face one in 2023. Moody's chief economist Mark Zandi told Insider in October that there is a 50-50 chance that the US won't face a housing recession next year, but it all depends on how the Federal Reserve acts to tame inflation.
"It's a very close call. But at the end of the day, if you're saying, pick a side, the side I pick is no recession," Zandi told Insider.