Is the Housing Market in a Recession?
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The entry-level housing market in the United States is faltering while the luxury segment flourishes, giving the country a “K-shaped” market, according to a new report from Realtor.com.
Those factors are making the market look more balanced than it actually is, Realtor.com said.
Image courtesy of Realtor.com
Based on online home-shopping traffic, interest in homes priced $370,000 and under fell 11.4 percentage points to 42.8% from 2021 to 2026. In 2021, homes below that price point made up about half of all listings and 54.2% of online traffic. This indicates a trend in which active buyers are looking for more expensive homes, while price-constrained buyers are looking at fewer homes altogether.
“In a typical supply-constrained entry-level market, fewer homes for sale would intensify competition for each listing,” Senior Economist Jiyai Xu said in a press release. “Instead, engagement with lower-priced homes has fallen to its lowest level since 2019. The data suggest that many households who would once have competed for these homes are no longer actively shopping at all.”
Realtor.com called the trend a “K-shaped housing market,” with an upward trajectory for “well-capitalized” buyers and another downward path for households restricted by affordability.
The mismatched market is perhaps best demonstrated by the disparity between median list and sales prices and the median price of homes shoppers view online. In July, the median list price was $428,950, down 2.4% year over year, while the median sales price held steady at $425,000.
In comparison, the median price of homes shoppers viewed online in 2022 was $30,000 less than the median listing price at the time. That same year, entry-level demand far exceeded supply, with homes priced from $90,000 to $300,000 generating views 1.2 times that of typical listings. Now, that gap is narrowing as luxury buyers view — and purchase — homes priced well above the median.
“The market is more balanced on the surface, but that balance is not the same as broad-based health,” Xu explained. “The narrowing gap between listing share and view share at lower price points is being driven in large part by the retreat of price-sensitive shoppers, not by a meaningful restoration of their buying power.”
Overall, Realtor.com said, entry-level demand has contracted while luxury demand has remained strong.
“The change is not a return to a broadly accessible market; it is a more stratified one,” Realtor.com stated. “In fact, an earlier look at housing-supply alignment to market-wide measures of income … confirms that an effective housing shortage remains, concentrated among lower-priced homes for sale.”
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Is the Housing Market in a Recession?
Boston Seaport condo buyers are watching the economy closely, and for good reason. Buying a Boston Seaport condo for sale is one of the biggest purchases most people ever make. And some recession talk in the media has made a lot of would-be buyers second guess their plans.
In the latest LendingTree survey, almost 2 in 3 Americans said they think a recession is coming. And 74% of respondents say that’s having an impact on their financial decisions.
But here’s the good news: the experts aren’t nearly as concerned.
Most Americans Expect a Recession, But Most Experts Don’t
According to an October report from the Wall Street Journal (WSJ), only 1 in 3 experts surveyed say we may be headed for a recession sometime in the next 12 months (see graph below):
If the expert economists aren’t super worried, should you be? We’re not in a recession right now. And there’s no guarantee we’re heading into one.
What we do have is uncertainty – and the best way to handle that is by leaning on facts, not fear. You can do that by making sure you have the information you need to make an informed decision.
Tips for Buying a Home During Periods of Economic Uncertainty
Here’s the best advice anyone can give right now. While it’s important to keep an eye on what’s happening in the economy, that shouldn’t necessarily overshadow your real-life needs. Economic shifts come and go, but the reasons people buy homes rarely change. Danielle Hale, Chief Economist at Realtor.com, explains:
“Well-prepared buyers who have been waiting on the sidelines are likely motivated by personal and lifestyle needs like growing families, new jobs, or retirement. And these considerations can outweigh short-term economic uncertainties . . . ”
Timing your move around real life (not the news cycle) is what matters most.
But here’s the key. If you’re going to buy a home right now, job stability really matters. You need to feel confident in your income and know you can comfortably manage your mortgage payments, even if your situation or the economy shift.
If your job is secure and you’ve built a cushion of savings, experts say you don’t necessarily need to delay. Just keep these tips from the economists at Redfin in mind:
- Set a budget and stick to it: Don’t overextend. Make sure your payments are affordable and your savings can cover any surprises. This includes factoring in costs likely to rise, like home insurance and taxes.
- Negotiate: There are more homes for sale right now, and other buyers may pull back because of their own fears. That gives you more negotiating power when working with sellers. Use it to get the best deal possible.
- Be strategic about payments and mortgage rates: Talk to lenders about what payment you can afford and the rate you can qualify for today, as well as your options if rates go down later on.
- Consider selling before you buy: If you already own a home, selling first can reduce the financial pressure and help solidify your budget for your next home.
But nothing replaces the value of having a trusted team around you, especially right now. As Bankrate says:
“Buying a home during a recession can sometimes be a good idea – but only for people who are lucky enough to remain financially stable . . . Be sure to enlist the help of an experienced local real estate agent. Not only do agents know their markets well, they will also work to get you the best deal in any given situation, including a recession.”
Boston Seaport Condos for Sale and the Bottom Line
Most Americans think a recession is coming. But most experts don’t.
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Is the Housing Market in a Recession?
CNBC’s Diana Olick joins Eamon Javers and ‘The News with Shepard Smith’ to report that realtors and builders are saying the U.S. has entered a housing recession.
My thoughts, here in Boston I do see a slowdown in the Boston condo for sale market. Both real estate agents and mortgage brokers have the same sentiment. However, no drastic changes in listing prices yet, but days on the market are differently in the rise.
