The U.S. market which has for the past couple of years been red-hot is now appearing to cool down. This has led some experts to say that the industry is slowly entering a recession. The high inflation rates along with the high-interest rates are proving to turn the tide on the housing market as buyers are limiting their spending.
New economic data also shows that home builders’ ideas in the industry are not the lowest they have been in two years as many buyers are pulling away from the homes they were intent on buying. Home sales are being canceled at the fastest pace since 2020 which is causing many builders to reconsider construction.
Lawrence Yun, the chief economist for the National Association of Realtors, has said that there is a decline -recession- in both home buying and home building.
However, this recession is having different effects on buyers and sellers. While buyers are pulling out of the market, sellers are still asking for high prices. This has led to demand being low, prices high and supply is limited. The increase in mortgage rates has also led to many potential buyers dropping out of deals.
All of this has caused builders to not be willing to build new homes, which means that the prices can remain up due to the limited supply.
Yun also said that the recession has not yet hit home prices, as most homes -40%- are still demanding the full list price.
According to NAHB chief economist Robert Dietz, the tight monetary policies and the high construction costs are also causing part of this housing recession.
Housing is an important part of the U.S. economy as it accounts for 18% of the country’s GDP.