Selling Real Estate

A “Housing Recession” Is Here, And It Isn’t Going To Be Fun…

The housing bubble has burst, and now people’s greatest concerns about the market are being confirmed. This week, a series of headlines announced that a new “housing recession” has officially arrived, but that shouldn’t come as a surprise for any of us. The stage was set for a major downturn for quite a long time. Over the past couple of years, experts warned that artificially low interest rates were creating a massive bubble, and now that the Federal Reserve is trying to roll back its policy by aggressively hiking rates, the housing market is being absolutely crushed because even as sellers slash prices to readjust to the current demand, buyers continue to face affordability issues. In lots of ways, what we are witnessing right now is similar to the market reversal seen in 2008. If nothing is done, it won’t be too long before millions of Americans are once again underwater on their mortgages and this crisis starts to reverberate on financial markets.
Yesterday, some worrying numbers were released by the National Association of Home Builders. Its Fargo Housing Market Index, which measures the pulse of the single-family housing market, dropped for the eighth consecutive month to 49, marking the worst period for the housing market since the 2008 financial crisis. For home builders, soaring input costs and lower demand make the perfect recipe for disaster. According to the NAHB, the Federal Reserve is responsible for this downturn. “Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” NAHB chief economist Robert Dietz stressed.
Believe it or not, the average rate for a 30-year fixed rate mortgage has almost doubled over the past 12 months. In August 2021, rates stood at only 2.86%. That’s why buying a home anywhere in the United States has never been more unaffordable than it is right now, and conditions will continue to deteriorate as we head toward 2023. According to Jose Torres, a senior economist for Interactive Brokers the U.S. is facing a “perfect storm” for a housing crisis similar to that of 2008. “A perfect storm is brewing in the real estate market due to nearly decade-high construction levels and dwindling demand,” Torres said. He also noted that many Americans can expect to “see a lot like what we saw during the great financial crisis” in terms of falling house prices.
Millions of people that would like to buy a home are being forced to keep renting due to the sky-high prices. But rent prices are exploding, too. Last week, official agencies reported that the median monthly rent in the U.S. has risen above $2,000 a month for the very first time. A new survey found that nearly 60 percent of all renters saw a rent increase during the past year, while just 38% said they saw their income increase, a study from Freddie Mac reported. Consequently, about 1 in 5 who experienced a rent increase said they are now “extremely likely” to miss a payment. 
We have seen the housing market cratering before, and all indicators suggest that another disaster is on the horizon. Do you even remember the tremendous suffering that millions of people experienced during 2008 and 2009? Well, it seems that we are going to see it happen again. When the housing market crash starts to accelerate even further in the months ahead, countless people will have their lives turned upside down as a result. A lot of this mess could have been avoided if our leaders had made different decisions. But they didn’t, so now a “housing recession” has begun. And it’s safe to say this isn’t going to be fun at all.

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