The article discusses the potential impact of current economic fluctuations on the housing market, primarily influenced by mortgage rates and economic health. While falling mortgage rates typically boost demand, a shrinking economy could suppress household formation and thereby reduce demand for homes and rentals. Although home sales had recently increased, uncertainty surrounding economic stability raises questions about future trends. The financial resilience of homeowners with stable, low mortgage rates is contrasted against the volatility of stock market wealth, highlighting varied impacts on housing.
In housing, it has been an interest rate game for a very long time. Rates go up, demand weakens and inventory builds. Rates go down, demand increases.
If we face a situation where the economy shrinks, that will decrease household formation and housing demand. That means even if mortgage rates move a little lower, we could still see decreased demand.
The American homeowner is in very strong financial shape, and that their strongest financial asset is their ultra-cheap 30-year fixed mortgage.
Home sales had been ticking up in recent weeks, but the uncertainty due to potential economic shrinkage raises questions about future demand.
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