Declining Housing Market: What to Know

- 18 January, 2024

It’s 2024, and as we were hopeful to see an improvement of the current market trends, we’re seeing a continuation of deteriorating outlooks for the slowing economy. It was noted from a recent Fitch Ratings analysis that slowing economic growth, increasing employment numbers and the continued restrictions happening in financing were all contributing factors for the prolonged deterioration of the 2024 market outlook. The overall outlook being better in 2023 at a positive 2.4% growth, as opposed to the forecast of 1.2% in 2024, with a very deflating outlook for recovery in 2025. Inflation itself remains above the central bank original 2% targets ().

Some of the largest risks currently threatening our economy are higher-for-longer interest rates and unstable financial market The fact that funding conditions are considerably tighter this year will result in a much slower economic growth and will directly affect key asset classes such as real estate and structured finance. Along with the decline of numerous sectors, profits are slumping, and demand is expected to slow as the result of higher interest rates and credit conditions. Our rising unemployment is on the rise and the cost of living still growing overtime are both direct factors facing consumer-based industries.

There are few sectors that have come down from a ‘deteriorating’ trend and leveled in the neutral zone year-over-year including public finance and insurance. U.S. has eased inflationary pressures around public finance as firms are incorporating higher costs into their budgeting such as utilities, i.e. water and sewer. Specifically, around Title Insurance we’re seeing a shift to neutral due to strong capital levels and leaner expense structures, while mortgage insurers continued to record strong profits, even despite the slowing economy. Canada also seeing similar neutral outlooks as they have adopted a higher interest rate situation, while U.S. life insurance outlook improved. Insurers will continue to benefit from the growing rates as balance sheet being strengthen.

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