Ongoing Effects of the Recent Housing Slowdown
There have been a number of different market analysts discussing a potential economic slowdown in recent weeks, and many of their remarks include data highlighting to a slowing housing market. Typically, construction and housing are strong drivers in the overall economy, with overall construction, both residential and commercial, accounting for about 7% of today's GDP. It is interesting to note that while housing starts are growing at a slower pace, no such change has been observed in the commercial sector. This downturn has some market watchers worried about the chances for another massive crisis similar to the crunch that precipitated the 2008 housing crisis and ensuing recession.
Of course, we are a long way away from a downturn anywhere near as a catastrophic as the one experienced a decade ago; however, it makes sense to take a closer look at the slowing growth in the residential housing market. Increased interest rates that are pushing up the cost of borrowing is one significant reason that is cited, but there are other factors at play as well. The equity markets have been significantly lower, with November edging toward being an overall down month. The Fed's three previous rate hikes, and the fourth anticipated for December are likely the biggest drivers of the slowdown as higher rates work against a strong housing market. However, the overall economic growth forecast is cooling for 2019 and especially in 2020. This forecast has many Fed watchers thinking that Powell may hold off on any multiple rate hikes at the start of the new year.
On the bright side, this slow down is helping to moderate overall housing costs and increase the available supply as more houses stay available for longer periods of time. The economic data may point to a global growth slowdown for 2019 into 2020 and that can help to keep interest rates steady or even lower. Analysts are pointing to the frothy real estate market of recent quarters that as left homes in many areas overvalued. This slowdown may help to bring housing prices to a more rational level while making it easier for first home buyers to enter the market. If you are looking to buy a home you will have a greater deal of leverage and more options to choose from. On the seller side, you may want to sit tight and see what the new year brings.
Give our office a call today at 239-514-2674! You may also inquire online using our online application ! NMLS #1743702