Housing Markets on the Verge of Recession Worldwide

  • By: Ahmed Khan
  • Date: August 16, 2022
  • Time to read: 3 min.

Global housing crises are rising amid the fears of recession and skyrocketing interest rates that are reducing the borrowing capacities of people around the world.

This is leading to the declining homebuilders’ confidence, as they are unable to find buyers for the new homes.

In the United States, the National Association of Homebuilders (NAHB) issued its monthly Housing Market Index (HMI), which shows that the overall value of the index slipped down to 49 in August. Anything above 50 is considered a positive indicator in the US housing market, which means that the US home sector has landed in the official era of recession.

Some of the reasons for the plummeting housing market include the rising interest rates, which are making borrowing difficult for consumers. This means that people are unable to take loans for their houses, not to mention that mortgage rates are also climbing with the increasing policy rates.

Similarly, the United States reached 40-year high inflation recently, which made construction highly expensive, thus resulting in higher housing prices.

The chief economist of the NAHB, Robert Dietz, noted that the housing crisis would persist as long as the US Federal Reserve does not bring the interest rate down. But Dietz was optimistic in the sense that the peak of inflation has already passed, which means that demands for houses can increase sharply earlier next year.

The NAHB report asserted that many homebuilders are even ready to reduce their profits to increase sales and avoid cancellations. 

China and Europe Face Equally Worse Economic Crisis

These housing crises are not limited to the United States, however. The Chinese housing market is facing even more misery as the prices continue to fall for the 11th consecutive month due to a rapid decline in demand.

Housing market in China played a critical role in the economic uplift of the country after the 2008 global financial crisis. China has long advised its citizens to invest in real estate instead of the highly fragile stock market of the country, so real estate investment in China is comparatively high compared to other countries. In 2019, the real estate market in China stood at a whopping $52 trillion, almost double the size of the housing market in the United States.

However, the looming uncertainty in the market has whipped out nearly $92 billion of the home investors since the beginning of the year, not to mention that most real estate giants have announced a mortgage boycott.

The strict lockdown policies of the Chinese President Xi Jinping is making matters worse, as the Chinese economy is struggling to grow at a pre-pandemic pace.

European real estate markets are having the same trajectory, as property values in some parts of Europe have fallen as much as 10% compared to the previous year.

Housing experts are advising home sellers not to sell their properties in a market panic and wait for some time before the demand gets high once again.

Ahmed Khan

Author - Ahmed Khan

Political Reporter - View All Articles
Ahmed is a freelance journalist covering the main political news from around the world. Muhammad joined InterSpaceReporter as a freelance journalist on Monday 8th August 2022.

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