The Housing Market Index, a closely watched industry metric that gauges the outlook for home sales, declined to 33 in November on a hundred-point scale. Under 50 spells trouble, Hill writer Daniel De Vise writes.
040324-N-3228G-003.PEARL HARBOR, Hawaii, new housing
A month earlier, interest rates on a standard 30-year mortgage passed 7 percent, capping the largest single-year increase in at least 50 years.
“Just to give you a sense of how far we’ve come, we started the year around 3 percent,” said Michael Fratantoni, chief economist at the Mortgage Bankers Association. “It has just been a wild ride.”
The difference between a 3 percent interest rate and a 7 percent rate amounts to $1,000 more in a monthly mortgage payment on a mid-priced American home, according to Nadia Evangelou, senior economist at the National Association of Realtors.
This is driven by high inflation causing the Fed to raise interest rates sharply, which correspondingly increases mortgage costs, writes Forbes.
We haven’t seen absolute house price declines on an annual basis in most markets, but that could be coming over the next few months
After an unprecedented campaign of rate hikes, Federal Reserve Chairman Jerome Powell has signaled that the central bank will ease up.
Where the housing market goes, the broader economy follows. Dietz, Fratantoni and others in the industry expect the nation to tip into recession, a state of economic malaise generally defined as two successive quarters of decline.
“The housing market leads the U.S. into recession, and it’s likely to pull it out,” Fratantoni said, with recovery arriving around the middle of next year.
A small percentage of homeowners, around 1 in 10, may be in trouble. They hold adjustable-rate mortgages that will shortly adjust to current rates, if they haven’t already.
“Those people are gonna get hit,” said Steven Carvell, professor of finance at Cornell University.
“To be sure, we’re going to see an uptick in foreclosures,” Dietz said. “But we’re not expecting it anywhere on the scale of last time.”
“We are on the edge of a recession, we think, and the recession is quite possible in 2023, but it’s not like standing on the edge of a cliff. It’s like standing on the edge of a swamp,” Kelly told Insider.
Kelly added in a “bad” recession, vehicle sales, inventories, and housing starts drop to low levels and need to be rebuilt, in turn helping the economy rapidly grow. If these areas don’t fall by a lot though, then they won’t need to recover much.
“And because of that, those cyclical sectors of the economy aren’t likely to rebound very strongly because they never fell very far in the first place,” Kelly said.
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GuvGeek
2 years ago
This is all bullshit. We are heading into Worldwide Great Recession because of a Lack of Energy to drive a modern economy. I predict that by next summer homeowners with loans will be upside down, by January 2024 there will be massive bankruptcy and Bread Lines, and by September 2024 massive Big Blue City unrest. Democrats will use Martial Law… Read more »
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This is all bullshit. We are heading into Worldwide Great Recession because of a Lack of Energy to drive a modern economy. I predict that by next summer homeowners with loans will be upside down, by January 2024 there will be massive bankruptcy and Bread Lines, and by September 2024 massive Big Blue City unrest. Democrats will use Martial Law… Read more »