A leading economist in the AEC industry has warned that the United States' housing sector has entered a recession, with ramifications for homebuilding in the coming years. Robert Dietz, chief economist at the National Association of Home Builders (NAHB), made the comments at the National Association of Real Estate Editors’ annual conference in Atlanta, GA this week.

“What I think is beyond denial right now, beyond debate, is the fact that the housing sector itself is in recession,” Dietz told the conference. “We had two negative quarters of GDP earlier this year, we’ll soon see a positive quarter in the Q3 report, but then we’ll have negative growth in Q4 and the first two quarters of 2023.”

Dietz’ pessimism about the industry is fuelled by the NAHB’s National Homebuilder Sentiment Index, a metric which, similar to the AIA’s Architecture Billing Index, is used as a bellwether for the industry’s performance. “It’s fallen for nine straight months in 2022, and it’s going to fall again when we report it for October,” Dietz told the conference. “For the year, it’s down 14% — the first year it’s fallen since 2011. It should drop again in 2023, and not until the following year will it begin to recover.”

Despite noting that the U.S. maintains a housing shortage of approximately 1.1 million homes (a separate analysis puts that figure at 5.5 million), Dietz believes that successive interest rate hikes by the Federal Reserve are translating into a decline in housing construction activity. His analysis is reflected by reporting from Reuters last week that construction spending has seen its largest drop in 18 months in August, including the steepest decline in residential spending in two years.

While the downturn has not yet led to job layoffs in the industry, which Dietz believes is due to the continuing strong performance of multifamily projects, he warns that such layoffs could be on the horizon.

While pessimistic about new residential construction, Dietz added that the increase in people choosing not to move home, and to continue working from home, will fuel an ongoing high demand for renovation services.

Forbes senior economics contributor Bill Conerly shared similar sentiments on residential construction in the outlet this week.

“Developers and contractors will suffer in the coming two years as new construction wanes,” Conerly wrote. “We are already seeing that in single-family construction. Multifamily projects typically have longer lead times, and thus more momentum going into this slump, but by next year, multifamily construction will also be down.”

“Expansive monetary and fiscal policy over-stimulated the housing sector, and now tighter monetary policy is pulling that back,” Conerly added. “Unfortunately, roller coasters fit in better at amusement parks than in residential neighborhoods.”

Warnings about the future of residential construction come despite a recent Dodge Momentum Index report which saw a dramatic increase in the demand for data centers, commercial projects, and institutional projects. However, the same index in August also showed a plateau in residential construction starts.