In 2008-2009 the nation was struck by a crisis in the mortgage credit markets that had repercussions for the next 15 years. The Great Financial Crisis (GFC) caused many people to lose their house or their job, or both. Many have yet to fully recover.
Fast forward to 2020-2022 and the housing situation in the United States is very different… Housing prices are rapidly rising and mortgage rates are headed higher as the Fed begins to raise rates and tighten financial conditions in an effort to fight inflation. Since WW2 housing has been a bastion of wealth building for the middle and working class. As an asset people were able to benefit from its appreciation and stability over time. Contrast this to the fact that many in the middle or working class have very little saved in their 401ks compared to the wealthier 10% of society; The wealthiest 10% own 89% of stocks, nearly $36 trillion. (1)
As housing prices and mortgage rates rise, younger buyers who are starting out in life are increasingly being priced out of the market. The University of Michigan Consumer Sentiment Survey takes a monthly snapshot of buying conditions for housing. The February 2022 figure came in at 36, a 42 year low. By way of comparison, the survey printed 70 in January 2020 and 56 in 2008 during the GFC.
So, the question is why are housing prices, as well as rents, continuing to rise with consumers largely sidelined?Continue reading “Housing Crisis 2.0”