US housing on the verge of correction?

Federal Reserve Chairman Jerome Powell said the US housing market is “likely” to go through “revision” a period. Not surprisingly, home prices have been rising steadily from 2020 until recently after mortgage rates soared and much of the market was simply priced in. Supply chain shortages are still a problem for construction companies. Investors with cash were able to bid on other buyers, and homes lasted less than a week on the market before being sold at a higher than demanded price. This is clearly not sustainable in the long term.

The great American dream of owning a white picket-fence home rose sharply during World War II thanks to suburban expansion and a GI bill that helped service members purchase real estate. Home ownership during this time jumped to 65% of the Great Depression. Surprisingly, home ownership actually increased during the Great Depression also by 3.7% to 4%. Keep in mind that the cultural dynamics were different at the time. Women couldn’t even open their own bank accounts. Home living was common until marriage for both men and women, multifamily homes were more common, and people simply lived with fewer. The playing field is completely different today.

In 2021, the real estate industry accounted for 17% of GDP in the United States. And, of course, investors, landlords, and homebuilders have done well during this housing boom. The average American has struggled because rent rates are in line with monthly mortgage payments, but getting a home is still tough for the middle class. Those with fixed low rates are unlikely to sell. Shelter makes up the majority of our household expenses, and countless people who have bought into the Highlands feel rich but are monetary poor. The Fed focuses on the demand side because it cannot control supply.

¬ęThe Chinese are on a real estate spending spree in the US

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