Soaring inflation, spiking gas prices, and the war in Ukraine have taken their toll on just about everyone’s bank account balances—as well as their frazzled psyches. We’re already experiencing the worst inflation rates of the 21st century, and now, the round-the-clock bad news is even sparking fears of another looming recession.
The overwhelming uncertainty over what’s coming next has already led to turbulence in the stock market and in investment portfolios, and it has real potential to impact the super-overheated U.S. housing market in a substantial and lasting way. Whether or not prices continue their skyward movement or come back to earth will largely depend on how all of these issues play out.
Rising inflation and gas prices, as well as the U.S. Federal Reserve’s plans to raise rates to tame runaway prices, “are each standalone events that could lead to a recession. And now you have all three of them occurring at once,” says Ali Wolf, chief economist of the building consultancy Zonda.
These challenges are making renting, buying, constructing, and even owning a home more expensive.
“All of the issues we’re continually facing this layer cake of misery. And Putin’s just the icing on top,” says Sean Snaith, director of the Institute for Economic Forecasting at the University of Central Florida in Orlando. “While wages are growing at a fairly rapid pace, the cost of living is rising even faster. Your paycheck can buy fewer things.”
A recession wouldn’t just hurt the economy. It would be likely to wallop the housing market, with the potential to slow down home and rent prices that have leaped to previously unimaginable heights. Rents are up nearly 20% from last year. For homes for sale, median list prices jumped 14.3%, compared to a year ago, in the week ending March 5, according to the most recent Realtor.com® data.
