A recession is on the horizon and housing will lead the way.
At the start of 2022, the MND average survey rate on 30-year fixed-rate mortgages was 2.76%.
This article was originally published by Mish Talk.
This week, the MND average survey rate on 30-year fixed-rate mortgages topped the 5% mark for the first time since November 2018.
Historically, 5% is not that high of a rate. But relative to home prices it’s an enormous rate, especially for first-time buyers.
Case-Shiller Home Price Index
Case-Shiller home price data via St. Louis Fed, chart by Mish
Kicking off 2022, the Case-Shiller home price index continues the record pace of 2021.
For details, please see 2021 Set New Annual Records for Home Prices. 2022 Continues the Trend.
Existing Home Sales Dive 7.2 Percent Wiping Out January’s Big Month
On March 18, I commented Existing Home Sales Dive 7.2 Percent Wiping Out January’s Big Month.
That decline was for February and most February sales were made in December or January when mortgage rates were mush lower.
At the end of January, the 30-year mortgage rate was about 3.68%. On March first the rate was 3.90%. On April 5, the rate was 5.02%.
Lumber Futures
Lumber futures courtesy of Nasdaq
Expect a Huge Housing Slowdown
Lumber futures have pulled back from recent highs but remain very elevated. That will resolve to the downside soon.
And the pending housing slowdown will impact demand for furniture, appliances, paint, landscaping, cabinets, etc.
Impact on GDP
The knock-on impacts will likely be greater, but that’s significant.
Recession on the Horizon
The Fed does not see it, but a recession is on the horizon.
