Redfin: Housing market likely in a recession, though ‘little risk’ of delinquent catastrophe

Real estate company Redfin said this week that a rapidly cooling housing market could indicate a “recession” within that sector of the economy, though it warned that homeowners were unlikely to see major rates of default absent a severe economy-wide downtown.

The company said in a Friday analysis that “seasonally-adjusted new listings of homes for sale fell 8% from July to August.” which it said was the lowest levels observed since the early pandemic chaos of May 2020, outside the pandemic, the lowest since November of 2012.

Redfin Chief Economist Daryl Fairweather suggested that, with mortgage rates at 3% a short while ago, the housing market was like a game of “musical chairs,” but with rates presently rising above 6%, “now the market is more like a middle school dance where a small number of buyers and sellers are pairing up during a slow song.” 

Fairweather did note that “while we may be in a housing recession, the slowdown in sales is not a sign of a bubble bursting.”

“The jobs market remains very strong, so there’s little risk that mortgage delinquencies or foreclosures will rise significantly,” he said. “It would take a severe—not soft—recession to send homeowners into distress.” 

“We will have to wait and see if the broader economy steers toward normalcy or recession in the upcoming months,” he added.