Housing Market 2023: When will the housing market recession end?

Housing Market 2023: When will the housing market recession end, and what is the impact on the broader economy?

The US housing market experienced a year-over-year price decline for three months, starting in February 2023. According to data from the National Association of Realtors, this was the first decline in home prices in 11 years. Home sales also fell by 3.4% between March 2023 and April 2023.

Experts at the Fannie Mae Economic and Strategic Research (ESR) group believe the housing market downturn could lead to an overall "modest recession" in the second half of 2023. If wage-related inflation persists, the Fed will likely maintain a tight grip on Economic policies. "Inflation has been resisting the Fed's efforts to cut it, and we view the risks to our baseline outlook as leaning toward more tightening rather than easing — although the Fed has, for the time being, taken a wait-and-see approach," said Doug Duncan, vice president of the Fed. Senior President and Chief Economist, Fannie Mae, in a press release.

With mortgage interest rates currently over 6%, according to Forbes, many homeowners need more time to be ready to sell. This creates a tight stock, or what Fannie Mae calls the "lock-in effect." Homeowners have mortgage rates that are much lower than today's rates. With market uncertainty, homeowners are holding onto their homes, exacerbating the challenges of low inventory, which could slow down prices.

With fewer homes on the market, potential buyers are turning to new homes, reports ESR Group. In general, this is good for the economy as it shows building confidence.

"Housing continues to be the number one exhibit of why we expect the recession to be modest. It continues to beat our expectations, Duncan noted, and we hope its relative strength to help drive the economy to expand again in 2024.

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