The first six months of 2023 far exceeded home builders’ expectations from the beginning of the year. Builders were forecasting a 30% drop in home sales based on the fall off of sales during the fourth quarter of last year when the interest rate for a 30-year fixed rate mortgage increased to over 7.0%. At the half-year mark, actual new home sales were only down 2.8% from last year.

This decade, the demand for housing is very strong, beginning with an estimated housing short fall of approximately three million homes. Baby boomers and millennials are on the move, and Gen Zs are now entering the housing market. For an in-depth look at housing demand, download my white paper, The Roaring 2020s: Housing’s Best Decade from our website.

Since March 2022, the Federal Reserve has been fighting inflation with monetary policies, raising the fed funds interest rate 11 times (550 bp). The Fed is rolling off its balance sheet $60 billion in treasury securities and $35 billion in mortgage-backed securities to gain control of inflation which reached 9.1% in June of last year. As a result, the Freddie Mac 30-year mortgage interest rate increased from 3.22% at the beginning of the year to 7.08% in October, which killed the housing market in the last quarter of 2022. That, along with the anticipation of an economic recession during the first half of this year, set the stage for expectations for this year.