Soaring inflation, a sputtering stock market, and talk of a possible recession all have new alarm bells going off for the housing industry. The National Association of Home Builders sent a letter to the White House this week calling for federal action to reduce the risk of recession, which they say "threatens to derail the current housing and economic expansion." In particular, the NAHB cites rising prices, interest rates, material costs, and rents, all of which have combined to create a perfect storm for the housing market.
Ted Jones, real estate economist with Stewart Title, believes home builders have good reason for concern. "Builders have major headwinds right now," he says. "In many markets around the United States they're out of lots...and costs of materials are out of control---in some markets lumber costs are up 300 percent compared to before the pandemic."
Buyers are finding themselves facing similar headwinds. "Not only are interest rates up, but our median price year-over-year is up more than 15 percent for existing home sales," says Jones. "So it's going to be a challenge for everyone."
As for what lies ahead, Jones agrees with some fellow economists that there will be a recession in the next year, as the federal government tries to tame inflation. But he still expects housing demand to remain relatively steady. "You can actually have a recession where GDP dips, but you don't lose jobs," he tells KTRH. "That's the kind of recession that won't reduce the demand for housing, and I think that's the one we're heading toward right now."
"A dip in demand would be a function of people losing their jobs," he continues. "And despite a drop in GDP, we don't see big job losses coming up."
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