With the Federal Reserve hiking interest rates the fastest since 1981, housing starts and existing home sales have fallen by 20% this year compared to 2021.
The housing market is cooling off. After two years of red-hot sales, economic data paints a tale of a market that’s seeing weaker sales, plunging sentiment among homebuilders, and rising mortgage rates.Some economists say it is.
With the Federal Reserve hiking interest rates, housing starts and existing home sales have fallen by 20% this year compared to 2021, Hepp noted. And with home builder waning as well, “residential investment, the measure of housing-related activity included in GDP, declined at about 12% annual rate in the second quarter” and is likely to fall again in the third and fourth, Hepp said.
“We are seeing weakness right now in the major housing indicators and we expect the residential sector to be a drag on GDP growth over the next several quarters,” she said, “but we don’t declare on the basis of that, that the housing market in isolation is in recession.”“I’m not really sure what it means to say ‘the housing market is in a recession’,” he said.
Recession or no recession, that doesn’t reflect on how home prices will grow over the next few months, one economist said.
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