Economist: Recovery is close

COEUR d’ALENE — If Dr. Robert Dietz was on the Federal Reserve Board, he would put a pause on interest rate hikes.

“I think they’ve done enough,” he said. “There’s no need to turn a mild recession into a moderate recession.”

Dietz, chief economist for the National Association of Home Builders, compared the Fed’s series of rate hikes over the past year to pushing the remote control button too many times.

There’s usually a lag, and then it shoots by where you wanted it to stop.

He believes the Fed is running a similar risk with the economy. That’s why he expects to see just one more rate hike in May.

“That should be the end of this cycle,” he said. “That sets us into a pretty good place for recovery going into the second half of the year.”

Dietz, along with NAHB Chief Lobbyist Jim Tobin, talked about the economy, politics and the housing industry Thursday during a luncheon sponsored by the North Idaho Building Contractors Association.

About 275 people attended the event at the Hagadone Event Center.

Dietz sees an economic rebound in the second half of the year, fueled in large part by an uptick in single-family home construction.

Nationally, he projects 795,000 single-family home starts this year; 923,000 next year and nearly 1.1 million in 2025.

Dietz expects mortgage interest rates to settle back to around 5.5% in the next two years, which should lead to an increase in housing demand.

Tobin said the country has been caught between the different economic policies of President Donald Trump from 2016 to 2020, and President Joe Biden.

It has hurt businesses' ability to plan, which is why Tobin said government needs to “get out of the way.”

He said the government’s trillions in COVID relief money “put gasoline on the fire of inflation” that is still burning today.

He said the Inflation Reduction Act of 2022 didn’t reduce inflation.

“It didn’t come close,” Tobin said.

With narrow majorities in the Senate held by Democrats and in the House controlled by Republicans, Tobin said it’s difficult to get anything done that actually benefits the economy.

He noted the Inflation Reduction Act was strictly partisan and didn't work.

He said when lawmakers on both sides work together, it's more effective.

“For housing, it’s so critical for us to do things in a bipartisan fashion,” he said.

Dietz said home prices in the Coeur d’Alene area have declined a bit in recent months, but have started to tick up.

“That is an amazing reflection of the underlying strength of this housing market, a real indication of the need to build additional housing,” Dietz said.

Even the cost of higher education has impacted home ownership.

Dietz said too many people are going to four-year universities and running up student loans of $30,000 to $40,000, which makes it tough to qualify to buy a house.

He said building material costs have declined slightly, which is good, "but reflects the weakness in demand for new construction."

Dietz believes an economic rebound is close. For residential construction in 2024, he predicts:

• Fed will ease, interest rates will normalize.

• Single-family homes building will lead a recovery.

• Demand will return, but supply-side issues will increase, including lack of lots and building materials.

Tobin said a reduction in housing barriers will help.

He said the country needs to produce more timber to build more homes and said it can be found in national forests.

“They’re not national parks,” he said.

The country imports about a third of its timber.

He said nearly a quarter of the cost of a new single-family home is due to regulatory issues, such as energy efficiency.

It could add as much as $15,000 to $20,000 to the construction costs, while perhaps saving a homeowner $20 a month.

“Find a way to build and solve the housing affordability crisis here," he said. "That’s what we have to do."