What a housing recession means for homeowners, buyers, sellers

Just months ago, the housing market remained in overdrive: surging home prices, historically low interest rates and unrelenting demand. However, data now suggests to some experts that the market is in a “housing recession.”

For example, sales of existing homes in July fell by 5.9% from June, marking the sixth straight month of a decline — and a drop of more than 20% from a year earlier. What’s more, t. have been layoffs and slower job growth in the industry, homebuilder sentiment has turned negative and buyers are canceling contracts in the face of interest rates that have jumped to 5.72% from below 3.3% heading into 2022.

“We’re witnessing a housing recession in terms of declining home sales and home building,” Lawrence Yun, chief economist for the National Association of Realtors, said in a recent report.

At this point, however, it’s a different story for homeowners, buyers and sellers.

“It’s not a recession in home prices,” Yun added. “Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price.”

But t. are signs the market is starting to shift in buyers’ favor.

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‘Homeowners are in a very comfortable position’

“Prices are still rising in nearly all markets across the country … and inventory is improving slightly, but not greatly so,” Yun told CNBC.

“Homeowners are in a very comfortable position financially, in terms of their housing wealth,” Yun said. He also recently said homeowners are “absolutely not” in a recession.

Sales of existing homes were down in July by 20.2% to 4.8 million properties from 6 million a year earlier, according to NAR. However, the median price last month was $403,800, up 10.8% from July 2021.

Housing market enters a recession

With interest rates roughly double w. they were six months ago, buyers have had more trouble qualifying for loans or affording higher rates. 

“I am seeing homebuyers cancel a contract if their payment is just a little bit higher than what they expected — I’m talking about $100,” said Al Bingham, a mortgage loan officer at Momentum Loans in Sandy, Utah. “Homebuyers are very cautious right now.”

Buyers may encounter ‘a more balanced market’

How to know if we are in a recession

Sellers ‘need to be realistic’