Retirement

The Housing Recession Is Here According to Homebuilders

By Barber Financial Group

August 24, 2022

The Housing Recession Is Here According to Homebuilders


Key Points – The Housing Recession is Here According to Homebuilders

  • Mortgage Applications and Homebuilder Sentiment
  • Homebuyer Competition Continues to Fall
  • More Homebuyers Are Backing Out of Deals
  • Eerie Similarities to the Great Recession
  • 3 Minutes to Read



The Housing Recession Is Here According to Homebuilders

On August 15, the National Association of Homebuilders (NAHB)/Wells Fargo Housing Index announced builder confidence in the market of new single-family home builds fell to 49 in August. The last time the confidence score fell below 50 was in May 2020. Anything below that threshold of 50 is considered negative.

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” – NAHB Chief Economist Robert Dietz

Mortgage Applications and Homebuilder Sentiment

Shane Barber last wrote on housing in June with his article on mortgage applications hitting a 22-year low. You should check it out, as well as his article on the housing market surplus. They’re both valuable reads to better understand how we got where we’re at today.

Whether you read it or not, it’s valuable to note that in his most recent piece on housing Shane wrote, “The other unknown is where the interest rates on 30-year mortgages go. If the economy falls into a recession during this season of interest rate hikes by the Federal Reserve, it’s almost a given that they will either stop raising rates or cut them again to restart the economy. If they don’t, the pressure on the housing market will likely intensify.”

It seems that the writing was on the wall in June.

Homebuyer Competition Continues to Fall

According to Redfin, homebuyer competition is down to early pandemic levels. Check out Figure 1 below to see how it’s dropped since the beginning of 2022.

Figure 1 – Redfin – Homebuyer Competition Dips for Sixth-Straight Month in July

More Homebuyers Are Backing Out of Deals

Furthermore, throughout July, 16% of homes that went under contract were canceled. That’s approximately 63,000, and again the highest rate since 2020 as you can see in Figure 2 below.

Housing Recession - july-home-cancelations-chart

Figure 2 – Redfin – Home Purchases Are Getting Canceled at Highest Rate Since 2020

According to the HMI survey conducted by the NAHB/Wells Fargo, about 19% of home builders reported having to lower prices in July to lower the rate of cancellations or to increase their sales.

Eerie Similarities to the Great Recession

Here’s an excerpt from yet another recent article from Shane, called The Great Recession’s History is Still Relevant:

“The stock market made an all-time high on January 4, 2022. But it has fallen since. Oil, wheat, and soybeans, along with most other commodities are near all-time highs. The housing market has been roaring due to several factors since 2020. The median price of a home in the U.S. set an all-time high in June. And, because inflation is high, the Fed is raising interest rates. That’s causing the average 30-year mortgage interest rate to jump up to around 6%. There’s little doubt that we are in a new housing bubble that is showing signs of weakness.”

From the traditional definition of a recession, two consecutive quarters of negative GDP, we are in a recession. A housing recession can do nothing but exacerbate the current recessionary environment.

Weathering the Storm

Time will tell what happens in the housing market, but one thing is for sure, you need a plan if you’re going to weather a storm that is anything like the Great Recession. If you don’t have a plan, the good news is, you can start your plan right now by clicking the start planning button below. By doing that you will get access to the same industry-leading financial planning software we use for our clients at no cost.

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If you would simply like to chat with a CFP® professional, we’re ready for you as well! Schedule your 20-minute “ask anything” session to get your questions addressed.


Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.