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Icy Days Ahead: US Housing Market Chill and the Economic Forecast

If you’re hoping for a warm-up in the US housing market, you might want to bundle up and prepare for a prolonged winter. Fannie Mae’s latest analysis paints a frosty picture that’s not melting away anytime soon, recession or not.

Recent numbers don’t lie: A whopping 18.9% year-on-year dip in existing home sales by June, as per Fannie Mae’s reckoning. And if that’s not icy enough, mortgage applications slumped to their weakest level in nearly three decades.

The culprit behind these cold stats? High mortgage rates. These elevated numbers are dissuading potential homebuyers from taking the plunge, and encouraging sellers to cling onto their properties — many of whom got a sweet deal with dirt-cheap rates years prior. While the broader US economic forecast for the coming year remains uncertain, one thing seems inevitable: this housing slowdown is set to persist.

In fact, even if the broader economy keeps its head above water, the housing market might still feel the chill. As Fannie Mae’s experts put it, “Existing home sales in 2023 are predicted to linger near the coldest levels since the 2009 freeze.” This largely boils down to the fact that even without a recession, real interest rates are expected to stay high, keeping mortgage rates lofty and homes out of reach for many.

But what if the US does take the recessionary plunge? Ironically, this might offer a slight thaw with a rollback of interest rates. Still, don’t expect a full-blown spring bloom in the housing sector. Lower mortgage rates could be offset by tighter credit conditions, a slackening job market, and a general drop in consumer optimism.

The bottom line? As Fannie Mae coolly puts it, under the most probable scenarios, “a grand housing revival isn’t on the horizon.”

But here’s the twist in our tale: While experts hope for a soft economic landing in the coming months, a possible downturn in 2024 could see real GDP dip by 0.2% year-on-year by the year’s end.

When can we expect a thaw? Housing market aficionados believe a true warm-up might only kick in once mortgage rates mellow down to around 5%. Yet, with the latest data revealing a 30-year fixed mortgage rate at 7.48% — a high not seen in 23 years — that springtime seems a ways off.


For those with an eye on the housing market, patience seems to be the name of the game. While the broader economic landscape remains fluid, the property sector remains frozen in a pattern that’s tough to thaw.