Rising Borrowing Costs Stand to Tip the Housing Sector Back into Recession

Source: Economics Group of Wells Fargo Bank, N.A. Summary The Residential Sector Restricted by Higher Interest Rates The US economy as a whole has shown a remarkable degree of resilience this year despite markedly higher interest rates. A strong labor market and moderating inflation have raised hopes that the US economy can avoid a recession. Unfortunately, not every sector of the economy has been as sturdy in the face of rising debt costs. After generally improving in the first half of 2023, the residential sector now appears to be contracting alongside the recent move higher in mortgage rates. Although mortgage rates may gradually descend once the Federal Reserve begins to ease monetary policy, financing costs are likely to remain elevated relative to recent norms. A “higher for longer” interest rate environment would likely not only weigh on demand, but could also constrain supply by reducing new construction and discouraging prospective sellers carrying low mortgage rates from listing their homes for sale. READ FULL ARTICLE >>