Is the US Housing Market In A Recession?

     A couple of weeks ago, Marcus & Millichap CEO Hessam Nadji appeared on Fox Business to speak about the state of the US Housing market (check out the video HERE). We always really enjoy Mr. Nadji’s cogent and informed analysis, and this video was no different. Below are a few of our takeaways from his commentary:

• • COVID made a huge impact on housing. We saw a 25% surge in avg. apartment rents from Dec. 2019-Dec. 2022. Home prices were up almost 40% during that same period. So, it’s not surprising to see rent declines in light of that runup and is probably a healthy correction.
  • Mr. Nadji believes we will see housing volatility in the near term. The consumer is cautious due to fears of an impending recession.
  • We are in a housing recession. A 40% decline in existing home sales y.o.y. confirms this. Despite this, the long term picture is more optimistic. A structural supply & demand imbalance still supports rising rents and home prices.
  • We’re not experiencing an over-built housing market even despite a few pockets/markets where apartment supply is historically high. While there are ~400k apartment units coming online this year (highest in 40 years), that still isn’t enough to satisfy the backlog of demand. Looking at these numbers more deeply, the top 10 metro’s with the highest levels of construction make up 45% of that number. Construction & supply are really concentrated in these markets, but the rest of the US should fare better.
  • We’re also not seeing an over-levered market like in ’08 either. Credit quality and lending standards are still intact.
  • Looking forward, if recession fears subside and inflation recedes as Hessam expects, he believes consumers will jump back into home-buying mode.