2024-07-01 20:33:53 +0300

How Will a Recession Affect the Housing Market?

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InvestorPlace
By Shrey Dua

The housing market continues to surprise economists with its stubborn resistance to contractionary monetary policy. Indeed, even as mortgage rates approach their highest level in decades, home prices seemingly only continue to soar. With further interest rate hikes on the way, which, some fear may prompt a wider economic downturn, the question on many analysts minds remains: How will a recession affect the housing market?

Housing is top of mind for many financial operators as some anticipate easing real estate prices in response to a potential recession. A recent Financial Times survey found that nearly 68% of economists expect a recession sometime next year. Perhaps rightfully so. Inflation continues to eat away at consumers’ buying power, American production is still hampered by supply-chain hiccups stemming from the war in Ukraine, and impending interest rate hikes will only further reduce the aggregate demand in the country. Heck, according to ARKK fund manager Cathie Wood, the U.S. is already in a recession.

Despite the dreary financial conditions in the country, housing prices have only climbed this year. The first quarter of 2022 saw homes increase in value more than 15% from a year prior. In April, housing saw a record high $407,000 median home price. This comes despite 30-year fixed mortgage rates approaching 6%, the highest level since 2008, up more than 2% since the start of the year.

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