The U.S. housing market is in a recession, and prices are likely to plunge 20% over the next year as rising mortgage rates take their toll on consumer demand.
But unlike the 2008 housing crash that helped to fuel a broader global financial crisis, the current recession is unlikely to seep throughout the rest of the. That's because the market has fewer entrenched risks than compared to the mid-2000s housing bubble.
"The very low level of inventory means that a headlong collapse in prices is unlikely, but we still expect a total decline of up to 20% by the middle of next year," Shepherdson said. Painfully high inflation and rising borrowing costs have proven to be a lethal combination for the once red-hot housing market, forcing potential buyers to pull back on spending. Theis tightening policy at the fastest pace in three decades as it tries to crush runaway inflation.
The rate hikes have driven the average rate for a 30-year fixed mortgage rate above 6%, according to Freddie Mac, the highest since the 2008 recession. With mortgage rates rising, demand for new homes is rapidly drying up, prompting home prices to fall. U.S. Federal Reserve Chair Jerome Powell attends a news conference following a Federal Open Market Committee meeting on September 21, 2022 in Washington, DC.
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