Has the housing recession really reached the United States?

At its lowest level in a decade, it washousing market index, a closely watched industry statistic that measures US home sales expectations, fell to 33 in November. Any number less than 50 is cause for concern.

Last month, interest rates on a 30-year mortgage topped 7%, the largest one-year increase in 50 years and one that’s sure to put potential homeowners off.

“Just to give you an idea of ​​how far we’ve come, we started the year around 3%,” he said. Michael Fratantoni, chief economist at the Mortgage Bankers Association. “It’s been a wild ride.”

Nadia EvangelioChief Economist at the National Association of Realtors. Estimated monthly mortgage payment On an average American home, the price increases by about $1,000 between an interest rate of 3% and 7%.

However, this month interest rates fell to 6.3%, giving the few remaining buyers in the ailing domestic market new reason for optimism.

We and many market participants anticipate a recession in the United States and many other places around the world GlobalismFratantoni said. This puts downward pressure on prices.

According to the National Association of Home Builders, the housing market has been in the doldrums since midsummer.

“The index has been declining for 11 consecutive months,” he said. Robert Dietz, chief economist of the homebuilder group of companies. “This will be the first calendar year in 11 years that single-family construction starts in a lower aggregate than the previous year.”

L’Economie It moves in the same direction as the real estate market. Dietz, Fratantoni and others in the industry expect the country to enter a recession.

“The housing market is leading the US into a recession and will likely pull it out of it,” Fratantoni said, with a recovery scheduled to come in the middle of next year.

For most homeowners, that means staying put. Most homeowners have a secured fixed rate mortgage with historically low interest rates of less than 4%.

“Anyone with a fixed-rate mortgage who got a mortgage before the middle of this year is really in a great place,” Fratantoni said.

Some homeowners have adjustable rate mortgages that will adjust to current rates soon, if you haven’t already.

“These people will be affected,” he said. Stephen CarvilleProfessor of Finance at Cornell University.

As much as 35% of all mortgages issued prior to the Great Recession of 2008 were adjustable rate mortgages. Many borrowers owed at least what their house was worth when values ​​fell.

According to real estate expert ATTOM, nearly half of all current mortgages are high equity, meaning borrowers owe less than half the value of their home.

“We’re definitely going to see an increase in foreclosures,” Dietz said. “But we certainly don’t expect it on the scale of last time.”

During the Great Recession, more than 6 million families experienced foreclosure. According to Dietz, the recession came after years of overbuilding, which led to an oversupply of housing and lower property values.

On the contrary, he said, there has been an “enormous amount of construction under construction” in recent years, which has led to a shortage of homes.

According to Fratantoni, default rates on mortgages—an indicator of impending foreclosure—are at historic lows.

With the current real estate downturn, Fratantoni said, “If you have a landlord who sees the market slowing, he’ll pull his property off the market.”

The correction in the overheating housing market was one of the reasons the Federal Reserve raised interest rates.

United States Case Schiller

The National House Price Index shows that from January 2020 to June 2022, house prices increased by more than 40%.

Redfin Corporation It expects prices to fall 4% in 2023 to a median price of $368,000, with other economists calling for reductions of up to 20% in home values.

“This does not necessarily mean that the value of all homes is beginning to decline,” he said. Daryl Fairweather, chief economist at Redfin. “Luxury homes will go down further. Affordable homes will probably hold their value a little better.

However, according to the National Association of Realtors, real estate economists expect a sharp decline in home sales: a 15% loss in 2022 and a 7% decrease in 2023.

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