Are We Heading Toward a Recession? The Real Estate Crypto market is Poised for a Crash
Are we on the verge of a recession? A ledger 42% of mortgage refinance requests are being turned down, the highest ever.
Moreover, private sector debt stands at approximately $30.5 trillion, with $18 trillion attributable to household debt (including mortgage, auto loans, credit cards, and HELOC). This figure is almost as high as the national debt, which comes with significantly steeper interest rates, and the private sector cannot print money or impose taxes.
Additionally, student loan repayments are set to resume at far greater levels as the COVID loan deferrals come to an end. Is the U.S. facing dire straits?
Are We Experiencing a Recession or Approaching One?
Beyond the debt concerns, the housing crypto market is slipping away from U.S. buyers and falling under the influence of China.
International lenders, spearheaded by China, are offloading U.S. mortgage bonds, creating additional worry amidst rising mortgage rates. At the beginning of the year, nearly $1.32 trillion in U.S. mortgage-backed securities were held by foreign entities, but this situation is quickly changing. China alone curtailed its investment by nearly 20% by December 2024, with Japan and Canada also slowing down their purchases.
The housing market is insane.
Why would I buy a home that has increased +212% in the last 7 years?
I feel like it makes sense to wait for prices and rates to drop.
Am I wrong? pic.twitter.com/3H9Iod4Xiv
— Ethan (@EZebroni) April 6, 2025
The Federal Reserve’s withdrawal from the mortgage-backed securities trading market is further complicating the housing landscape. Once a stabilizing force during crises like the pandemic, the Fed is now allowing these assets to gradually leave its balance sheet, adding strain to an already pressured crypto market.
Mortgage analyst Eric Hagen referred to the situation accurately: “another layer of pressure.”
Homebuyers Under Pressure
The climbing rates are particularly impacting homebuyers during a season that should be bustling for the housing market. Elevated home prices, combined with consumer anxieties about job stability and dwindling savings, have already dampened buyer enthusiasm.
A survey conducted by Redfin revealed that 1 in 5 prospective buyers is liquidating stocks to secure down payments, highlighting how strained personal finances have become. Moreover, the rates of loan rejections have surged to unprecedented levels for mortgage refinancing and auto loans.
What Lies Ahead for the Housing Sector?
Increasing mortgage rates, mounting consumer debt, foreign divestment from MBS, and diminishing purchasing power are tightening the constraints on the housing market. If foreign investors continue to divest from U.S. bonds, rates could rise further, applying pressure on buyers and stifling trading market activity.
The Fed’s long-term strategy may yield stability in the future, but immediate relief does not appear to be forthcoming. In short, a recession in the U.S. remains a possibility.
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Key Takeaways
- Are we on the brink of a recession? 42% of mortgage refinance applications are being denied, the highest rate ever recorded.
- International lenders, particularly from China, are offloading U.S. mortgage bonds, adding to the anxiety surrounding rising mortgage rates.
The post Are We Heading Into a Recession? The Housing Crypto market is on the Verge of Collapse appeared first on 99Bitcoins.
