The recession mainly affects the housing market, as recent data on decreased home starts and sales, combined with rising mortgage rates, point to a slowdown.
However, it doesn’t always follow that the industry is experiencing a downturn like it did during the Great Financial Crisis. That’s not how it works at all.
For instance, earlier this week, Robert Dietz, chief economist of the National Association of Home Builders, stated that home builders blamed supply-chain-related expenses and rising interest rates as the reasons that “have brought on a housing crisis.”
The National Association of Realtors used the exact phrase on Thursday. According to Lawrence Yun of the National Association of Realtors, “Builders are not building,” and sales have decreased for six months, indicating that economic activity has slowed.
So, he said, “we are in a housing recession.”
Houses are still being sold
To be clear, that does not indicate that the larger housing market is experiencing a breakdown.
According to Christine Cooper, chief U.S. economist and managing director of CoStar Group, homes are still selling.
Cooper told MarketWatch that while the data may appear “gloomy,” “to a significant part, the slowing in the market reflects a reversion to a more balanced market.”
Given that wages have not kept up with inflation, she said, it was about time that sales would decline.
And costs aren’t going through the roof.
Homeowners are “definitely not” experiencing a recession, according to Yun of NAR.
“The phrase recession conjures up dark times for regular customers. The market is challenging for both homebuyers and sellers, Yun told MarketWatch in a follow-up email. But when home values rise, homeowners continue to amass housing wealth.
Even if purchasers may be pulling back, there are still plenty of houses on the market and good-quality buyers.
Simply put, the risk of a broader economic recession is making buyers feel more insecure.
According to Jen Holland, an agent with ERA Key Realty in Massachusetts, the first response is for individuals to do nothing.
Herd mentality is also a factor, as she noted: “There were lines out the door at open houses when everyone went out to look at properties.” Everyone said, “I should probably go buy a house.”
According to her, the number of open houses has decreased now that the market has slowed, rates have increased, and recession talk is rampant. People are feeling more uneasy.
There has undoubtedly been a change in consumer confidence, according to Hall.
Some of her customers have walked away from deals because they were uneasy or wanted to wait for pricing or interest rates to go down. People sometimes seem “frozen,” she claimed, or as though doing nothing is the most steady course of action for them.
Hall claimed that two significant purchases failed to materialize this week and that she has difficulty completing several of the buyers. She claimed that a lot of work was being done behind the scenes to prevent people from leaving.
The macroeconomic environment, however, suggests that “there could still be a few more months of overshooting to the downside” before inventories increase, housing price increases slow down sufficiently, and “sales restart.”
We “may soon be coming out of a housing recession,” according to NAR’s Yun, who predicted that home sales would rebound soon as rates become more stable.
However, some buyers have benefited from all the rumors of a recession and declining demand.
Prospective buyers are utilizing the chance to seek more from sellers and take their time.
She remarked, “I had one residence where they gave me 37 requests for post-home inspections.” “I nearly got out of my chair. And this is a forty-year-old house.