The U.S. housing market is teetering on recession. Will the economy soon follow? High mortgage rates and home prices batter key part of the economy, but the news isn’t all bad.
The last time the housing market suffered a major meltdown in 2006, it took the entire U.S. economy with it. But history never follows the exact same script twice.
The weakening housing market is undoubtedly going to hurt the economy. Single-family home construction fell to a 1 million annual pace rate in May from a 15-year high of 1.31 million in December. Permits to build more homes also tumbled.
It’s probably going to get worse, too.
Home prices had already surged to a record high when the Federal Reserve in March began to quickly raise interest rates to combat high inflation. The central bank’s aggressive action pushed the 30-year fixed mortgage to more than 6% from just 2.75% last fall.
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