It's a Tough Market for New Homebuyers & Existing Homeowners

The US stock market recently experienced its biggest slump since January 2022, but the pain is far from over. Recession woes are a genuine concern, and the Fed is carefully considering hiking the interest rate to combat runaway inflation. In May 2022, US inflation rose at an unprecedented clip – 8.6%. It’s the highest annual inflation rate growth in 40 years. The actual figures easily eclipsed market expectations of 8.3%, and sentiment plunged in the financial markets. The core inflation rate slowed to 6%, but market expectations were 5.9%.

Among the biggest bugbears in the market are energy prices. These rose 34.6%—the highest price movement in almost 17 years. Given the poor state of the macroeconomy, no sector remained unscathed. Fuel oil increased by 106.7%, gasoline by 48.7%, and natural gas by 30.2%. All of these figures represent multi-year highs. None of this is good for the stock market – the volatility index (VIX) is currently reading 27.75, up 6.36% on Friday, June 10, 2022. The higher the volatility, the more bearish the outlook for stocks. Simply put, there is a grave concern for the future of equities, as represented by the VIX.

How Is the Housing Market Being Affected by the Macroeconomy?

The housing market represents one of the foundations of the US economy. According to NAHB, the housing market’s contribution to the GDP averages between 15% and 18%. According to census.gov, new residential construction for April 2022 for privately owned housing increased at a seasonally adjusted annual rate of 1.724 million. This figure is 0.2% lower than the March estimate but 14.6% higher than the April 2021 rate of 1.505 million. New homebuyers are in a Catch-22 – prices are sky-high, and mortgage rates are climbing rapidly. But it’s no better for homeowners trying to refinance their properties to catch a break in this tough economy. Between 2016 and 2019, mortgage rates hovered around 2% – 4%, but now they’ve increased above 5%.

Homeowners with investment properties typically qualify for higher mortgage rates, even with 20% down on purchases. However, the Mortgage Bankers Association (MBA) recently reported that the percentage of purchase applications declined for the fourth consecutive week, down 13% from several weeks ago (May 27, 2022). What this means is that the higher costs of borrowing are crowding out new homeowners. This, combined with rapidly rising home prices, makes it untenable for people to purchase property in this market.

Step By Step: Companies are Working to Make a Difference

Many companies worldwide are putting their best foot forward as responsible corporate actors. From multinational beverage corporations like Coca-Cola and retail giants like Walmart to international iGaming companies, it’s all about working together to make a real difference. This is particularly true with diminishing disposable incomes. Corporate Social Responsibility (CSR) initiatives factor heavily into the equation. For example, Pragmatic Play – a global leader in iGaming, says that it’s all about ‘a duty to assist those in the communities where we enjoy a presence and do business. We truly believe that – together – we can make a difference.’

The current mortgage refinancing rate ranges between 3.625% on the low end and 5.990% on the high end for 30-year fixed refinancing. Of course, the lower rates only apply to shorter-term mortgages with more money down. Currently, the median home price is $447,000. A 20% down payment equates to $1989 at a mortgage rate of 5.09%. In June 2021, the monthly payment would have been approximately $1550 when interest rates were 2.99%. This is where consumers are hurting most, and it’s not any easier for renters.

The national average rental increased by approximately 20% year-on-year in 2021. A rental of $1600 per month would have increased by another $320 to $1920 per month. This makes it incredibly difficult for everyone in the economy. These trends are likely to continue due to inflation, high property prices, and rising mortgage rates. In some cities, rentals have increased by 40%. A big part of the problem is a nationwide housing shortage. This drives up rental costs, worsening inflation and making it incredibly difficult for new homeowners.

We can simply watch all of this unfold and hope for the best!