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Housing Recession vs Housing Hangover?

Are we actually in a housing recession now?

As indicated in the Inman article quoted below, the use of the term “housing recession” has skyrocketed in news sources, as well as Google searches in the past month. This is my challenge with the media. Articles are often written with sound bite, click rate goals vs. clear reporting of factual dynamics. It’s easy to do in our current real estate market because there are multiple, confusing factors at play.

As I discussed my recent blog article, comparing market reports to quantum physics, differing perspectives are true – at the same time.

To keep it simple, the number of sales has dropped significantly, inventory has increased. However, home prices have not declined, simply softened.

It’s important to take a deep look at market dynamics, focus on the micro trends in your area and don’t get overwhelmed with buzz words that cause alarms.

There is a collective “pause” in market activity right now. Some cite delayed vacations, as well as buyers waiting for new inventory in the fall as causes rather than a market crash as detailed in my Luxury Market Report for August.

Because there’s no fixed or universal definition for the term, the economists who spoke with Inman were hesitant to give a simple yes or no response when asked if the U.S. is currently in a housing recession. All of them agreed that there has been a marked downturn in the housing industry, but in some cases preferred other less dramatic terminology.

“I would call it a housing hangover,” Ratiu offered, arguing that the current landscape is a response to unusually heady times. “We’re sobering up after an unusual two-year period in which we saw massive monetary and fiscal stimulus.”

Ratiu went on to note that growth in the housing sector is “moderating” but that prices have not collapsed and in some cases are continuing to rise by double digit percentages. That doesn’t mean the housing market isn’t also sluggish in many respects, but Ratiu noted that the housing market is not currently in “free fall,” which is what some people might understand when hearing the word “recession.”

Inman News – 9.2.22

Overall our challenge is we are in “uncharted waters” trying to understand market dynamics that are unlike any previous market shifts. While the 2008 mortgage crisis is a point of reference for many of us, we can’t simply take one set of data and draw conclusions that we are facing the same risks. This complexity has been a challenge for clear market reporting since the onset of COVID two years ago. For instance;

  • Foreclosures – there are increasing numbers of foreclosures as I predicted. However, the causes, the process and the sales are completely different than in the mortgage crisis. Homeowners with equity, but no liquidity are going to foreclosure post-forbearance. It’s an economic crisis, not an equity crisis. Additionally, lien holders are selling REO’s as flips, post renovation at a high market value vs. selling as distressed assets during the mortgage crisis.
  • Corporate and foreign investors – a significant increase in the portfolio acquisition of residential homes by fund managers and foreign capital is higher than any time in history. It’s predicted that by 2030, 40% of rental properties will be owned as assets in Wall Street funds. Capital moving from foreign countries as well as Wall Street has a different focus – return OF money vs. return ON money. Normal supply / demand dynamics aren’t any longer clear market indicators.

To stay on top of today’s market, follow me on social media. You can always access my monthly market reports, or click here for an instant home valuation. Feel free to book a time on my calendar for a confidential consultation about your real estate goals.

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Susanna Kunkel

Susanna Kunkel brings her skills from a career in the executive offices of major corporations to her real estate business - treating each client like a VIP. With 18 years of experience as a real estate advisor, you can be confident in knowledgeable, personalized, confidential service. Hear what her clients say -

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