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On the Cusp of a Recession, Housing Costs Are Soaring

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Market Data + Trends

On the Cusp of a Recession, Housing Costs Are Soaring

Experts warn that the U.S. housing market could be moving full steam ahead into a recession after years of record growth. Here's what that means for homebuyers

September 12, 2022
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As the housing market continues to cool after years of red-hot home sales, recession concerns are causing a growing number of buyers to hold off on home purchases. Even as bidding wars slow to a halt and sellers drop their asking prices, the Fed’s inflation control methods are ongoing, according to CNBC. The average rate on the 30-year fixed mortgage started this year right around 3%, and 9 months later, that rate is just above 6%, meaning that a person buying a home for $400,000 would now have a monthly payment roughly $700 higher than it would have been in January. 

In addition, home prices are currently 43% higher than they were at the start of the pandemic, while active inventory is 43% lower than it was in 2019. As an affordability crisis becomes more widespread, buyer demand is dipping, but those who can still afford inflated home prices are finding less competition and more bargaining power.

Homebuilder sentiment in the single-family market fell into negative territory in August for the first time since a brief dip at the start of the pandemic, according to the National Association of Home Builders. Builders reported lower sales and weaker buyer traffic.

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz in the August report.

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