The Housing Recession is Over - by Conor Sen
The Housing Frame
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The Housing Recession is Over<br>The vibes remain bad, the recovery is uneven, but recession is now behind us
Conor Sen<br>Aug 10, 2026
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At the end of last year I really thought that if the housing market were going to crack, it’d happen in 2026. In states like Florida, Texas, and Arizona, there were 20 or 30 percent more homes for sale than at the same point before the pandemic. And that number was still growing.<br>This is a big reason why homebuilders have been struggling. Interest rates had been high ever since the Fed raised rates a lot in 2022, but for awhile builders made it work because there just weren’t that many homes for sale, and they had tools like interest rate buydowns to help people with affordability.<br>The Housing Frame is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
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That dynamic had started to change in 2024 but especially last year. Sellers slowly lost patience, and the number of homes for sale began piling up in the South and much of the West. Prices began falling. It started dawning on people that we weren’t going to see 5% mortgage rates any time soon. Nobody wants to buy an asset that’s falling in price, and that’s what housing became. For most people, renting was cheaper than buying, with money left over to invest in stocks.<br>Here’s the concern I had coming into the year. Inventory would keep rising. Sellers would get more desperate. Prices would fall faster. Buyers would get even more skittish. Homebuilders would cut production and jobs. It’s the kind of thing that’s led to recessions in the past.<br>But in January there were signs of a shift. Inventory stabilized in Florida. To be fair, there were still plenty of homes for sale in the state. Some of what happened was probably frustrated sellers taking their homes off the market. But still, it meant maybe things weren’t going to keep getting worse.<br>In February the housing market got some help from interest rates. It’s been awhile, but that’s when everyone was freaking out about the impact of AI on the labor market. Software stocks got destroyed. People were talking about office jobs like we were in that moment in February 2020 right before COVID shut down the US. All that worry helped push 30-year mortgage rates to 6%.<br>But then the conflict in Iran broke out. The Strait of Hormuz was closed. Oil prices and interest rates spiked. Housing stocks got crushed. By the end of March, mortgage rates were back over 6.5%. Consumer confidence plunged. If there were ever a time when the housing market was going to crumble, it was here.<br>But it didn’t. Mike Simonsen, the chief economist at Compass, showed in mid-April that the war hadn’t caused a spike in inventory. In fact, inventory was starting to shrink compared to a year ago. Pending home sales had dipped a bit but hadn’t plunged. The war had caused the housing market to stagger but it was still standing.<br>May and June showed signs of improvement even without help from mortgage rates. Compass and Redfin said in their weekly market reports that pending home sales were up. Several homebuilders noted in their earnings reports that their use of incentives was down and their profit margins were up. PulteGroup, the third-largest homebuilder in America, said that their orders in Florida were up 19% from a year ago.<br>And then there’s San Francisco. Just like the AI boom transforming the city’s economy, home prices and rents are rising rapidly. Through June, home prices in the city are up 9.2% vs last year according to Redfin. According to Apartment List, rents in the city are up a whopping 23%. And the leading AI companies – OpenAI and Anthropic – haven’t even gone public yet. When they do, their thousands of employees and investors will have access to tens if not hundreds of billions of dollars of wealth, and some of that will no doubt find its way into real estate.<br>At the high end of the housing market, that stock market wealth is what to watch. In much of the country – places like Phoenix and Dallas and Atlanta – home prices have been flat for 4 years. But over that time the S&P 500 is up 80% and the Nasdaq has doubled.<br>The job market is also now in a better place. The unemployment rate has been falling all year. Jobless claims are down. Job postings are up. Construction and manufacturing jobs are increasing again. So are white-collar jobs, which is a notable change from last year.<br>What hasn’t picked up is worker confidence. I’ll be honest, in January I was worried about some of the AI doom scenarios for workers. Hiring had been weak for two years. Unemployment was up. The release of Claude Code felt like a real moment in the discourse. But the way things have evolved since then make me feel better about the outlook for workers. AI keeps getting better but the job market data has clearly improved. Consumers remain unhappy about...