Housing Woes Now Not As Bad As In The 2007 Recession: CNN Business

The largest US banks reported relatively solid third-quarter earnings on Friday, Oct. 14, 2022. But within those reports, investors found ominous clues about the future of the housing market, underscoring fears of an upcoming crisis, Nicole Goodkind reported for CNN Business.

Photo Insert: Citigroup and Morgan Stanley also reported that mortgage loan growth was moderating.

JPMorgan reported that third-quarter home lending revenue plunged 34% from a year ago, and Wells Fargo logged a drop of 52% over the same period. The declines were due primarily to a spike in interest rates leading to a slowdown in demand for mortgages.

Citigroup and Morgan Stanley also reported that mortgage loan growth was moderating. As the Federal Reserve raised interest rates this year, mortgage rates also spiked to their highest level since 2002. Higher mortgage rates and elevated home prices could quickly lead to an end to the pandemic housing boom, but the Federal Reserve thinks that's a good thing.

"We've had a time of a red-hot housing market all over the country," Fed President Jerome Powell told CNN Business in September.

"For the longer term what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level...and people can afford houses again. We probably have to go through a correction to get back to that place." Powell's prescription for what he referred to as a "difficult" housing correction has led to worries of another 2008-esque housing and financial collapse.

“This isn't 2008: Market conditions are very different than they were in 2008. Analysts are telling homebuyers and investors not to panic. And housing inventory remains low, which prevents a crash in price as demand tempers,” Goodkind reported.

"There was a housing shortage of around 5 million homes before the onset of the pandemic. That shortage is not going away soon," said Lawrence Yun, chief economist with the National Association of Realtors trade group, in a report last month.

Homeowners locked into 30-year low-rate mortgages are also reluctant to sell their homes and switch to higher rates.

JPMorgan Chase CFO Jeremy Barnum said in response to a question from CNN Business Friday that he is "not expecting a big crash" in housing along the lines of what happened during the Great Recession of the late 2000s.

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