What Recession? America's Booming Housing Market Is More Robust Than Ever

• Author: William Asher
• Posted: 2023-12-09

Contrary to popular opinion. The American housing market is heating up. The nation's property is worth a staggering $35 trillion, which is just slightly higher than the present value of the stock market. The value of the stock market is steadily increasing which is in direct opposition to the American economy.

Despite the recession, housing prices were 4.3% higher in May than the same time last year. This steady rate of growth is just below average since the previous housing market crash that occurred ten years ago.
 

Hot Housing Market

San Francisco is not immune to the housing market fluctuations. The average dwelling place can still set the average buyer back $1.1 million. And that can hit your bank account fast and hard. Economists are still expecting that housing prices will continue to fall. But so far, that prediction is looking quite shaky.

Housing markets tanking during a regular recession is normal. But what the nation is experiencing in terms of the housing market is not normal. Economists were expecting a V-shaped recovery. Instead, the recovery that the country is experiencing is U-shaped with dips and slides.

Mortgage defaults are increasing as homeowners are putting more properties on the market. In a competitive job market, housing incomes are decreasing along with the disparity in purchasing power.
 

A-typical Recession

Senate majority leader Mitch McConnell said that the current recession is not typical. So far, 4.8 million Americans have returned to their jobs for June. The 11.1% unemployment numbers look favorable as it coincides with the housing market.

During the recession of the 1990s, home prices declined by 10%. In the subsequent financial crisis of 2008, the economic downturn gave way to a housing drop that was three times higher than the rigid recession of the 1990s.

What is happening now with the current recession and the unemployment crisis is unprecedented. Take note; the American housing market is not about to cool off any time soon. The rate of foreclosures is not expected to obtain the depths of the previous recessions.

Household income to mortgage debt is holding quite steady, coming in close at 30% of debt to income ratio. Banks have stopped signing up consumers with subprime mortgages at an alarming rate, choosing instead to loan to consumers who have the choicest of credit scores.

Tighter financial regulations have deterred banks from making risky gambles. Meanwhile, federal assistance is more readily available for economic and housing assistance.
 

Federal Assistance

It comes as no surprise that Congress is not waiting for another housing meltdown to step in a stop the free fall. The free-flowing federal aid is what is separating this recession from the one that happened a decade ago, where homes were falling into foreclosure at a staggering rate. Congress had waited in 2008-2010 to act until the banks had already foreclosed on millions of homes.

Homeowners with federal mortgages can have their payments paused for one year. They will not have to go through much red tape to have their payments stopped which is a relief for many families.

Presently, 10% of households have taken advantage of the mortgage payment pause since May. Consultants at Capital Economics believe that many requests for mortgage forbearance were made as a sort of insurance policy. Homeowners could pay their mortgages but were requesting assistance as a hedge against future calamities.

Many households have also benefited from federal stimulus funds. The generous cash assistance is enabling homeowners to keep up with their mortgage payments. So far, a fifth of American households has used the $1,200 stimulus funds to pay their mortgages.
 

The Actions of the Federal Reserve

Loose monetary policy is helping to stimulate the economy. Mortgage rates are at an all-time low. Consumers with prime credit can get a conventional mortgage from a commercial lender at a rate just above 3%. Lenders are also seeing an increase in homeowners looking to refinance their properties.

Property hunters desiring to move out of densely populated city areas can now purchase more expensive properties. Since the economy has reopened, mortgage applications have increased by 20% as city-dwellers seek more rural abodes.

The generous monetary policy is contributing to a bustling housing market. Researchers previously noted that before the recession, housing supply could not keep up with demand due in part to land restrictions and fierce competition for new housing structures.

Once social-distancing requirements have been eased, builders will commence constructing new homes. The dense fog will eventually clear, and the housing market will stabilize. Pent-up demand will outstrip supply; home prices rest on a secure foundation.