At the start of the year, price-sensitive buyers flooded the new-home market due to a combination of price adjustments and mortgage rate buydowns from home builders, and while it seems a housing recession in the new-construction sector is over, strained affordability could stall demand and lead to another slowdown, Fortune reports. New-home sales were up 20% year-over-year in May, and home builder confidence is also on the upswing, but the Federal Reserve’s aggressive rate hikes are still restricting consumer spending in the housing market.
If the economy continues to weaken as new-home inventory grows, Ali Wolf, chief economist at Zonda, warns that the new-construction market could slip back into another recession.
“The big question is,” Wolf asks, “is that it? Are we back in growth mode from here? I’m not so sure it is a straight line up. There are still broader economic concerns that could impact housing demand, including potential turmoil following the Federal Reserve’s restrictive policy, a significant pullback in consumer spending, or even the fallout from the commercial real estate sector. We are watching closely to see if there’s a double-dip recession in housing or if demographic-supported demand is enough to withstand wider issues.”
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