Housing Market = Deep Recession

Market Experts Say “We are in a Deep Recession”

As of Mid-September, 2022 the United States Housing Market has entered a “Deep Recession.” The causation of this recession has its roots in both mortgage rate increases and ongoing home price inflation. The inflated home prices have both Pandemic/Supply Chain Origins and high consumer demand origins. This has now trickled down to home builders and contractors. In brief, building materials and supplies have been negatively impacted by Covid induced supply disruptions. Plain and simple, homes are markedly more expensive to build, particularly over these past 24 months.

Until Jan-Feb of this year, all of the increased building material costs were passed on to new home buyers. Today however, although building materials are costlier, only a portion can be passed on to the buyer. In fact, builders are now increasing incentives to entice would-be homebuyers. Incentives are taking the form of price reductions, mortgage rate buydowns (Free cash given at closing to buy interest rates down), and free home upgrades/amenities. The National Association of Home Builders (NAHB) reported this week that September was the 9th straight month with falling builder confidence.

This drop in confidence is a simple validation of how all the negative factors (discussed in this article) have hurt home affordability, causing a cooling of the market. Builder sentiment, reported by the NAHB, has declined sharply this year. Primarily due from the elevated…