Housing Market On The Brink Of 1980s-Style Recession – Newsonyx
Newsonyx
  • NEWS
  • POLITICS
  • BUSINESS
  • SPORTS
  • LIFESTYLE
  • Login
No Result
View All Result
Newsonyx
  • NEWS
  • POLITICS
  • BUSINESS
  • SPORTS
  • LIFESTYLE
No Result
View All Result
Newsonyx
No Result
View All Result
Home News

Housing Market On The Brink Of 1980s-Style Recession

The rates are soaring towards 8%.

Aziah KamaribyAziah Kamari
November 2, 2023
in News
recessions, 1980s, mortgage, rates, Wells, Fargo, Market, housing

Photo Courtesy of Unsplash (Maximillian Conacher)

21
SHARES
88
VIEWS
Share on FacebookShare on TwitterShare via Email

Is the housing market about to hit rewind and take us back to the 1980s? According to Wells Fargo, the answer might be a resounding yes. While the broader U.S. economy has shown remarkable resilience despite the constant chatter about an impending recession, the housing market seems to be painting a different picture.

Mortgage rates, currently hovering around 8%, have combined forces with pandemic-induced surges in home prices, creating a perfect storm of housing market instability. The longer these elevated mortgage rates persist, the more prospective buyers are burdened with soaring borrowing costs. In Wells Fargo’s recently released commentary, aptly titled “Rising Borrowing Costs Stand to Tip the Housing Sector Back Into Recession,” economists highlight the looming threat.

RELATED POSTS

Hannah Payne’s Verdict: Found Guilty In Clayton County Shooting

University of Alabama’s Elijah Pritchett Arrested For Knowingly Spreading A STD

For the first time in over twenty years, the 30-year fixed mortgage rate reached this alarming 8% mark in early October. Although there’s hope for rate declines as the Federal Reserve eases its fight against inflation, the cost of financing homes is expected to remain elevated, leaving the prospects of a “housing rebound” looking rather dim.

Drawing parallels between the current situation and the 1980s, Wells Fargo economists Charlie Dougherty and Patrick Barley point to similarities that should concern us all. They join a chorus of voices, including Bank of America Research and First American, in warning about turbulence reminiscent of the ’80s. The ’80s were marked by high mortgage rates as the Federal Reserve, under the leadership of Paul Volcker, grappled with double-digit inflation. It was a time when homebuyers experienced the ’80s déjà vu: high inflation, high interest rates, and a generational shift as millennials transformed into their boomer parents, in terms of homeownership.

“A ‘higher for longer’ interest rate environment would likely not only weigh on demand, but could also constrain supply by reducing new construction and discouraging prospective sellers carrying low mortgage rates from listing their homes for sale,” Dougherty and Barley emphasized.

The impact of rising borrowing costs on affordability is glaring. According to the National Association of Realtors (NAR), the average principal and interest payment for those using a 30-year fixed-rate mortgage increased by a staggering 26% in August compared to the previous year. This rise in monthly payments has far outpaced the growth in median family income, which only increased by 5% over the same period. With mortgage rates continuing to climb from August levels, monthly payments are set to become even more burdensome.

Related Story: Britain Concerned With New COVID-19 Variant Spreading In South Africa

However, it’s not just elevated borrowing costs that have eroded affordability; soaring home prices have also played a role. Home prices have surged by over 40% since the pandemic’s onset, with consistent increases throughout this year. Tightened supply compounds the problem, as homeowners hold onto their properties to preserve their low mortgage rates, exacerbating the scarcity in an already under-built market.

Wells Fargo expects that if the Federal Reserve sticks to its forecast of lowering interest rates next year, mortgage rates will follow suit. They predict the average 30-year fixed mortgage rate to end this year at 6.94% and drop further to 6.39% in 2024, eventually reaching 5.70% by 2025. Nevertheless, near-term affordability woes caused by elevated mortgage rates are likely to weaken housing activity.

The impact of these factors on existing-home sales has been pronounced, with sales hitting their lowest level in 13 years due to the so-called lock-in effect. However, the decline in sales isn’t surprising, given that housing is one of the most interest-rate sensitive sectors of the economy. The National Association of Realtors (NAR) has even sent a plea to the Fed, urging them to halt interest rate hikes to bolster the housing market, a move reminiscent of the ’80s when homebuilders sent a piece of lumber to the Fed, seeking lower interest rates to revive housing demand.

In summary, while there’s an underlying demand for homes, particularly among millennials in their prime homebuying years, the housing market faces significant challenges ahead. Rising borrowing costs, elevated mortgage rates, and skyrocketing home prices are creating a precarious situation. Still, there’s hope that if the Fed delivers on its promise of lower interest rates, the housing market may find a way out of this ’80s-style crisis.

Tags: 1980sHousehousingMarketmortgageratesrecessionWells Fargo
Share8Tweet5Send

Related Posts

traffic, deadly, Kenneth, Herring, Hannah, Payne, Clayton, County

Hannah Payne’s Verdict: Found Guilty In Clayton County Shooting

byAziah Kamari
December 27, 2023
0

In a shocking turn of events, 25-year-old Hannah Payne has been found guilty in the death of 62-year-old Kenneth Herring...

University of Alabama’s Elijah Pritchett Arrested For Knowingly Spreading A STD

byMary Symone
December 24, 2023
0

University of Alabama reserve tackle, Elijah Pritchett, was arrested on Wednesday Dec. 20 for allegedly knowingly spreading a sexually transmitted...

Jeremy Cooper, Peter Cichuniec, paramedics, ketamine, verdict, jury, Elijah McClain

Denver Jury Finds The Two Paramedics Involved In The Killing Of Elijah McClain Guilty

byTaylor Berry
December 23, 2023
0

It has been an emotional few years for the McClain family, precisely as multiple trials unfold regarding the 2019 killing of 23-year-old...

domestic violence, boyfriend, Ty Shelton, Los Angeles, deputy, Niani Finlayson, LASD, police, LA,

Trigger-Happy LA Deputy Kills Mother After She Called For Help With Her Domestic Violence Situation, The Officer Has Done This Before

byTaylor Berry
December 23, 2023
0

A Los Angeles deputy murdered a 27-year-old woman who called for help because of her allegedly abusive boyfriend, according to the Guardian. A...

Carol Stuart, family, Michelle, Wu, Alan Swanson, Willie Bennett, mayor, Boston

Boston Mayor Apologizes To Victims Accused Of Being Involved In The 1989 Murder Of Carol Stuart.

byTaylor Berry
December 21, 2023
0

Boston Mayor Michelle Wu formally apologized to victims inaccurately blamed for the 1989 murder of Carol Stuart and their families Wednesday morning,...

Next Post
book, bans, library, association, Florida, schools, cut, ties

Florida Breaks Ties With American Library Association

Body Rub Babes, cleavage, Come And Talk 2 Me, wife, Cam'Ron, NBA, Kisha Chavis, Joe Smith

Thirsty Rapper Cam'Ron Asks Ex-NBA Player Joe Smith's Wife To Be His 'Body Rub Babe' And Gawks At Her Cleavage

RECOMMENDED

Simone, Biles, Jonathan, Owens, gymnast, NFL, athlete, rival

Simone Biles vs. Jonathan Owens: The Playful Clash of Athletic Titans

December 28, 2023
boxer, Ali, Gervonta, Davis, Islam, Muslim, Abdul, Wahid

Gervonta Davis Embraces Islam With New Name

December 28, 2023
point, teenager, Anthony, Black, game, Orlando, Magic, Wizards

Magic’s Star Anthony Black Shines In Latest Victory

December 28, 2023
traffic, deadly, Kenneth, Herring, Hannah, Payne, Clayton, County

Hannah Payne’s Verdict: Found Guilty In Clayton County Shooting

December 27, 2023
football, league, Sam, Allison, premier, Boxing, diversity, Black

Sam Allison Is The First Black Premier League Referee In 15 Years

December 26, 2023
  • Ky'le Harris, Banneker High School, Diploma, Refuses, Dead, Killed, Graduating

    School Refuses to Give Ky’le Harris’ Family a Diploma After Her Death

    11589 shares
    Share 4635 Tweet 2897
  • Father Removed From Frontier Airlines Flight For Comforting 2-Year-Old Daughter During Departure

    9024 shares
    Share 3608 Tweet 2255
  • New Video Emerges Of Black Woman Killed During Mexico Trip Excitedly Anticipating Excursion With Friends Before Death

    7695 shares
    Share 3078 Tweet 1924
  • DCF Social Worker Stabbed To Death During Home Visit In Illinois

    7559 shares
    Share 3024 Tweet 1890
  • Popular Instagram Chef Seemingly Cancels Himself After Colorist Tweets Surface

    7436 shares
    Share 2974 Tweet 1859
  • About
  • Contact
  • Privacy Policy

© 2021 SNACKABLE MEDIA LLC. ALL RIGHTS RESERVED.

No Result
View All Result
  • NEWS
  • POLITICS
  • BUSINESS
  • SPORTS
  • LIFESTYLE

© 2021 SNACKABLE MEDIA LLC. ALL RIGHTS RESERVED.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • NEWS
  • POLITICS
  • BUSINESS
  • SPORTS
  • LIFESTYLE

© 2021 SNACKABLE MEDIA LLC. ALL RIGHTS RESERVED.