Final Straw For America’s Economy May Be Housing Collapse

(NewsGlobal.com)- The once-hot housing market is rapidly cooling.

A flurry of new economic statistics released this week indicates that the sector is beginning to cool: Homebuilders’ confidence in the industry has dropped to its lowest level in two years, and consumers are fleeing the market, canceling home sales at the quickest rate since 2020, while builders are reconsidering building.

Bill Adams, the chief economist at Comerica Bank, said that housing has turned into a headwind for the US economy and will almost certainly reduce real GDP growth over the coming year.

Inflationary pressures and rising borrowing costs have proven to be a toxic mix for the property market, causing prospective buyers to reduce their expenditure.

As purchasers retreated from the market, house sale cancellations increased to a two-year high in July. According to a new Redfin report published on Tuesday, almost 63,000 house purchase agreements were called off in July, accounting for 16% of homes under contract that month. This is an increase from 15% in June and the highest rate in more than two years.

The home cancellation rate was roughly 12.5% just a year ago. Buyer concerns over the increasingly bleak economic picture are one of the leading causes for the spike in cancellations, as the Federal Reserve pushes to tighten rates at the quickest pace in decades, triggering a recession.

Heather Kruayai, a Redfin real estate agent in Jacksonville, Florida, said that buyers are also wary because they are concerned that a possible recession could force property values to fall, and they don’t want to be in a scenario where they buy a property and it’s worth $200,000 less in two years. So some are waiting to purchase when prices are lower.

Furthermore, sentiment among builders in the housing market fell to its lowest level since the beginning of the COVID-19 outbreak in August.
The National Association of Home Builders/Wells Fargo Housing Market Index, which monitors the pulse of the single-family housing market, plummeted for the eighth month in a row to 49, the lowest level since the 2008 financial crisis.

The index was at a 35-year high of 90 in November 2020, boosted by low mortgage rates and record-low borrowing rates. New home construction fell for the third consecutive month in July, with housing starts falling by 9.6%.