The Coming Housing Market Downturn

After two years of rapidly rising housing costs, we’re now seeing signs of a housing market downturn in residential real estate.

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Despite the housing market’s skyrocketing during 2020 and 2021, the housing market is now cooling, and we may even be facing a recession.

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Several facts support the thesis of the cooling housing market. Let’s dive into the indicators that can reveal the housing market’s slowdown.

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Indicators that can reveal the housing market’s slowdown

Although the official interest rate doesn’t directly affect the mortgage rates, it indirectly affects it via two channels.

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On one hand, this monetary policy makes the cost of borrowing money to buy a home higher. On the other hand, it is one of the most significant factors influencing the 10-year Treasury yield.

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Rates in 2022 are at the highest level we’ve seen since 2008. The increase in the mortgage rate makes it tougher to rent and housing less affordable.

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The increase in mortgage rates yields a decrease in housing affordability.

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As the mortgage payments climbed 53.7 percent and the median family income only rose 5.8 percent in June 2022 compared to one year ago, June’s affordability index figure of 98.5 is the lowest since June 1989.

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4. New Listings Have Started to Drop and Home Construction is Slowing Down

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