Beaulieu & Lokar with ITR Present Economic Forecast at NAFCD
Colorado Springs, CO, November 17, 2023-Two ITR Economics economists presented at the NAFCD convention in Colorado Springs, Colorado.
Brian Beaulieu, CEO and chief economist of the group, reported that 2024 is going to be the peak of a mild downturn in GDP, the operative word being mild.
He expects the non-residential side of the flooring business will fare well in 2024 but will feel the pain in 2025.
He noted that corporate profits are lower than a year ago, which is beginning to put capital expeditures and related decisions on hold.
Beaulieu stressed the importance of businesses having adequate cash flow to shore themselves up, adding that inflation will start to wane in 2024 and “remain quiet” into 2025 but will soar again by the end of the decade.
Labor, he noted, will remain tight, and wages won’t recede-similar to what the U.S. experienced in the 1990s.
With real incomes rising and the value of assets increasing, consumers have greater purchasing power than ever; the key is to get them to realize it, he said. The current homeownership rate is 65.9%, and two-thirds of homeowners have a mortgage rate of 4% or less. With interest rates declining a bit in 2024 and incomes rising, housing affordability will improve, but consumers will have to shift to a mindset of purchasing smaller houses.
Economist Connor Lokar said he's seeing the single-family housing market already begin to recover, noting that, for those tied to single-family, the worst is behind them, though the Northeast is lagging. Lokar expects to see moderate positive single-digit outcomes in builder volume in 2024, with 2025 even stronger and filtering out to 2026-though the market won’t snap back to 2021 levels, he cautioned.
For those reliant on remodeling, things are more complicated, said Lokar, with existing-home sales down 24.8% over the last 12 months, flirting with lows the market saw near the bottom of the Great Recession.
Lokar expects some rate reductions but noted that the best-case scenario is probably high fives, though that should still spur some activity.
Multifamily starts are down 28.1% in 2023 and will get worse before they get better. He expects that decline to continue through Q3 of 2024.
Meanwhile, non-residential construction is "getting drunk on the backlog." It trails GDP by about a year, so that sector will start to soften moving into 2024. There is currently enough on the books for the first part of 2024, he said.
Related Topics:Beaulieu International Group