A combination of detrimental economic factors has led home builders to say that the United States may be headed into a “housing recession.” This is due to a variety of issues, including rising building costs and lower prices, that have made it less profitable for builders to begin projects. This has led to some fears that the cooling housing market will limit the number of home sales, and may be a sign of broader economic difficulties on the horizon.
What is This “Housing Recession?”
Home builders claim that the U.S. is either headed towards a housing recession, or in the middle of one already. This is due to rapidly declining mortgage rates, which have led houses to be sold for much lower than they might have been, as well as rising costs for building materials that has made it more costly to build certain projects. As a result, profit margins for home builders are on the decline, leading to fears of a recession within the housing market.
Why Are They Experiencing a Housing Recession?
There are a number of economic factors contributing to this apparent recession in the housing market. The first is due to tightening money policy at the Federal Reserve, which has significantly increased interest rates as a means of stifling inflation. This has made it harder to borrow money for real estate projects, and chased away buyers and developers who might otherwise have bought properties. In addition, an increase in the availability of housing inventory has driven down prices, making home sales less profitable and, thus, less appealing to sellers.
What Does This Mean For the Market?
Overall, a housing recession means that prices are likely to stay flat or decline over time. This is potentially good for buyers, who may be able to purchase properties for lower prices than they would have been able to previously, although rising interest rates also mean that mortgages are likely to be more costly to take out than they might have been before. Home builders, meanwhile, are forced to put many of their projects on hold until demand begins to increase again.
How Does This Affect You?
If you are a prospective home buyer, now might be a good time to start looking for a new home. With more inventory available than before, at some of the lowest prices for housing since the beginning of the COVID-19 pandemic, you are more likely to be able to find a home that fits your needs for a price you can afford. As a prospective seller, however, you may need to either consider holding off on a sale, or accept that you may not get as much for your property as you might have liked.
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