Evidence Builds For Painful Housing Recession

Source: Forbes — 

Housing market sentiment is at lows we haven’t seen since the 1980s. Inventory metrics are moving in the wrong direction, and mortgage rates have risen back to levels from before the financial crisis. How bad will the housing market get?

Falling Consumer Sentiment

The University of Michigan tracks how consumers are feeling about the housing market. You have to go back to the early 1980s to find as much pessimism as we’re currently seeing for housing.

There are some similarities between then and now. In the early 1980s, the U.S. Federal Reserve (Fed) was raising interest rates dramatically to combat inflation, sound familiar? Rates were substantially higher then that they are now, but the chilling effect on the housing market was similar.

The good news for later in the 1980s was that rates did drop over the coming years, making mortgages more affordable. However, now the Fed has plans to raise rates further, not cut them. Still there are early signs that inflation could be easing and if that does ultimately prompt the Fed to cut rates that may breathe some life into the housing market.