July 2022 Housing Market Update
Market Update: Assessing the Impact of the R Word on the Housing Market
Opening Line: Are you concerned about the R word and wondering what that means for the housing market?
The R Word The term on everyone's lips is the R word. According to a recent poll conducted by the Wall Street Journal, three-fourths of global CEOs believe that we are either currently in a recession or will be facing one within the next 12-18 months (Graphic 1). This revelation has left many people questioning how this economic condition will affect the housing market.
What does that mean for the housing market? While a recession can have far-reaching effects on various sectors of the economy, it's important to note that it doesn't necessarily imply a decline in home prices (Graphic 2). In fact, historical data has shown that during previous recessions, home prices have remained relatively stable or continued to appreciate. Additionally, in an effort to stimulate economic growth during a recession, central banks often lower mortgage rates (Graphic 3). This can create opportunities for homebuyers and potentially support the housing market.
Market Update Despite the uncertainties surrounding the economy, the median home price continues to climb (Graphic 4), reaching an impressive $380,000. This indicates ongoing demand and confidence in the housing market. Another positive sign is the increase in new listings (Graphic 5). More properties coming onto the market can provide buyers with additional options and potentially help balance supply and demand.
However, it's worth noting that the months' supply of inventory (MSI) remains unchanged at 0.8 MSI (Graphic 6). Although there has been a slight increase from the beginning of the year, the current MSI level is still considered very low. This low supply of homes for sale can contribute to a competitive market with limited options for buyers.
Interestingly, the city of Richmond has not experienced as significant of a cooldown as other markets. In June, the percentage of list price was at an impressive 104.5% for May sales (Graphic 7). This indicates that homes in Richmond are selling at prices above their listing price, reflecting strong buyer demand in the area.
In conclusion, while the prospect of a recession may raise concerns, it's important to analyze the specific dynamics of the housing market. Historical trends suggest that home prices can remain stable or continue to appreciate during economic downturns. Additionally, the potential for lower mortgage rates could present favorable conditions for buyers. As the market continues to evolve, monitoring key indicators such as the median home price, new listings, and MSI can provide valuable insights into the health of the housing market.