It's been tough for home buyers this year with interest
rates more than doubling and home prices continuing to climb
things.
Finally looking up though,
as mortgage rates have taken back down a bit
in November and December and buyers gained back some leverage
as homes sit on the market for longer
after several years of a seller's market, what will 2023 hold
for the housing market
joining me now is David O'Reilly Ceo of the Howard Hughes Corporation,
a real estate development and management company operating in multiple markets.
David is great to see you. I know many predicting that the U. S.
Might see a recession next year demand dwindling.
Do you think the housing market is already there?
I think absolutely. Kristen it's great to be here and thanks for having me.
But if we're going to define the housing market,
recession is two consecutive quarters as lower
prices on homes and lower home volumes.
Clearly were there already.
I think the question for the housing market is how
deep and how long could this housing downturn be?
And what does this housing downturn look like compared to the last?
How much does your company work with both residential and commercial real estate,
David, just to kind of give our viewers a taste of
the pulse that you have on the industry,
we are the largest owner and developer
of master planned communities in the country,
with over 100,000 acres.
We're also the largest seller of land to homebuilders.
While we don't build the homes,
we create vibrant communities that consists of the
homes of folks live in the offices,
they work in, the places they shop and the trails that connect at all between.
So we really have our finger on the pulse,
I believe of what's happening in both the
residential and commercial real estate markets right now.
So what's the outlook that you see for prices in 2023?
And does it differ across the commercial and residential spaces?
Oh, I think it's very much different about between residential,
commercial and even within the commercial sector,
but focusing on the residential.
I don't think this downturn is anything
like what we saw post global financial crisis
over the past several years.
We've seen record home sales, but they've been to end users, not speculators
in new home construction since the global financial
crisis has not kept up with household formation.
In fact, I would suggest that we're about four million homes short nationally
As existing homeowners are locked in with great low interest rates are going to
be reluctant to sell out and potentially downsize their home on a trade.
So we have limited resale inventory.
Well, that means new construction is needed to meet the growing demand for housing.
And if you combine limited resale inventory with an under supply of existing homes,
I think while we'll see a tough first half of 2023 in the residential market,
I think the second half in 2023 is going to come back very quickly
well and let's just be clear inventory is all always been a problem,
right.
Maybe it is a bit different for your company.
But I know for residential real estate even before the
pandemic there just simply wasn't enough inventory on the market.
Right.
Where do we stand right now, when it comes to inventory and your outlook on that?
I think we're still under supplied homes.
I think there's much more demand out there for
home buyers and we have homes to sell them.
I think part of it is adjusting affordability, the size of the homes,
the cost of the homes and making it affordable for the end user and it's getting land
in the home of home builders and home builders
incentivized to build homes to meet that demand.
They were moving as fast as they could coming out of the pandemic.
And despite all of our efforts,
I think that we were unable to keep up
and that's what led to this approximate four million home
that we see today.
You know, I see a lot of advertisements,
I take the ferry home on the east River and I see a lot of
advertisements for howard Hughes on my journey to and from work on a daily basis.
I know obviously you have a big presence here
in new york city, even though you're joining from texas.
And so what's the outlook in some of these metropolitan areas, right.
I think people wondering
as we make our way through this pandemic is new york city going to be the new york city
that it once was and a lot of that does have to deal with office real estate,
for instance, what's your take?
Well,
I would tell you that my view is that the decision paralysis that employers
faced over the past several years coming out of the pandemic has begin to thought
it's allowing companies to make thoughtful decisions on return to office,
thinking about hybrid work,
their design layouts and really importantly where businesses
are located and that mixed use walkable,
amenity rich environment are definitely winning and I
think they're going to continue to win.
I don't think it's a question of all office and
you can't throw the baby out with the Bathwater.
I think there are gonna be offices that win and those
that lose and it's gonna be a flight to quality.
And we're going to see that momentum head into 2023.
We're seeing an incredible flight to quality within our portfolio here in Houston,
we're seeing great flight to quality within our summerland
portfolio as employers looking to attract their employees back.
Look for those great mixed use urban walkable destinations.
Okay, so what are David will end on this one?
Some of the hot destinations where you're seeing a lot
of demand and rising activity in the housing market.
I would tell you that what we're seeing is very consistent with
what we've seen reported and in May of this past year,
CNBC reported.
The cities that had the most folks moving into them and
the fastest recovery were used in las Vegas and phoenix.
And we don't see that momentum shifting at all.
We continue to see those three locations being the epicenter of the recovery.
Yeah, Alright. No surprise there.
David O'Reilly Ceo of Howard Hughes Corporation. David, Thank you.