Brace Yourselves: The Housing Market Rollercoaster Is Coming!
Prepare for 8% Mortgage Rates and a Potential 1980s-Style Housing Market Recession, Wells Fargo Issues Warning
Wells Fargo warns that the US housing market might face a recession like the 1980s due to 8% mortgage rates. Brace yourselves!
Hold onto your mortgages, folks! The US housing market is heading straight for a recession, and it ain’t gonna be pretty, according to the wise folks at Wells Fargo. They’re waving the red flag, warning us that mortgage rates will spike to almost 8%, leaving homebuyers running for the hills. Yikes!
But let’s take a step back and put this into perspective. It’s like déjà vu all over again, just like the 1980s. Picture this: the Federal Reserve, like a bull in a china shop, aggressively raising interest rates, and bam! The property market gets thrown under the bus. Sound familiar?
Now, the Fed has been signaling its intentions loud and clear. They’re keeping borrowing costs high and mighty until at least 2024 to quell the pesky inflation beast. But guess what? This move is gonna send construction and activity crashing like a demolition derby. Don’t say we didn’t warn you!
The Wells Fargo folks, Charlie Dougherty and Patrick Barley, had some choice words to share. In a research note, they said, “The residential sector is shrinking faster than your favorite sweater in the dryer, all thanks to those skyrocketing mortgage rates.” Ouch! I can almost hear the housing bubble deflating.
Sure, there’s a possibility that mortgage rates will eventually descend once the Fed eases up on their monetary policy. But don’t get too excited, my friends. Financing costs will remain painfully high compared to what we’re used to. Imagine trying to find a needle in a haystack, only the needle is affordable housing. Good luck!
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And speaking of mortgage rates, let me blow your mind. Since March 2022, those average 30-year fixed-rate mortgages have shot up from under 4% to a staggering 8%. Ch-ch-ch-changes, indeed!
As if that’s not enough, the higher borrowing costs have triggered a nosedive in the construction of new houses. Yeah, we’re feeling the squeeze, folks. It’s a seller’s market, and those lucky homeowners with historically low mortgage rates are playing hard to get. Only 1% of Americans have actually sold their homes in the first half of 2023. Can you believe it?
But let’s rewind to the glorious 1980s. The Fed was on fire, fighting inflation like superheroes. Mortgage rates soared to an astounding 19%, leaving homebuilders in a panic. One memorable incident involved Jackson, MS-based homebuilders sending a shipment of lumber to the Fed’s chair, Paul Volcker, with a desperate plea: “Help! Help! We Need You. Please Lower Interest Rates.” Ah, the good old days.
Fast forward to today, and history seems to be repeating itself. The National Association of Realtors, Mortgage Bankers Association, and National Association of Homebuilders recently penned a letter to the Fed’s board of governors, begging them to pump the brakes on their rate-hiking campaign. Desperate times call for desperate measures, my friends.
So, what’s the takeaway from all of this? Well, the housing market is taking a nosedive faster than a rollercoaster ride. Home sales, mortgage applications, and even the homebuilder confidence indices are all taking a hit. It’s like a domino effect, folks. Brace yourselves!
But hey, it’s not all doom and gloom. The rollercoaster can be a thrilling ride, full of twists and turns. And who knows? Maybe the Fed will change course and save the day. We’ll just have to wait and see.
So, grab your popcorn and buckle up, folks. The housing market rollercoaster is about to begin. Let’s hope we come out of this ride with our wallets intact and a few laughs along the way. See you on the other side!
[Fed]: Federal Reserve [ANBLE]: Americas and Non-Bank Liquidity and Economics *[US]: United States
