Falling US home prices ‘still nowhere near the bottom:’ economist

A downturn in US residence gross sales and costs is probably going simply starting, a outstanding economist warned on Thursday.

Ian Shepherdson, the chief economist at Pantheon Macroeconomics, stated in a be aware to shoppers that the housing market’s latest droop is “nonetheless nowhere close to the underside, particularly for costs.”

His forecast got here after current residence gross sales dropped 5.9% to a seasonally adjusted annual charge of 4.81 million models in July, based on the National Association of Realtors.

Current residence gross sales have fallen for six straight months and have hit their lowest stage since Might 2020. The droop has coincided with a surge in mortgage charges over the past 12 months, which compounded the affordability problem for would-be homebuyers going through steep sale costs.

“The underside remains to be a way off, given the diploma to which demand has been crushed by rising charges; the required month-to-month mortgage cost for a brand new purchaser of an current single-family house is now not rising, but it surely was nonetheless up by 51% year-over-year in July,” Shepherdson stated in a be aware to shoppers.

“To make issues worse, the market is now grappling with quickly rising provide in addition to crumbling demand,” he added.

Economist Ian Shepherdson expects US residence costs to droop within the months forward.
Bloomberg through Getty Photos
A general view of two houses for sale next to each other with for sale signs on each front lawn as seen in Hawthorne, NJ on August 18, 2022.
House costs that surged in the course of the COVID-19 pandemic may very well be in retailer for extra declines.
Christopher Sadowski
Houses for sale
Current residence gross sales declined almost 6% in July.
Bloomberg through Getty Photos

House costs that surged in the course of the COVID-19 pandemic are set for extra declines, based on Shepherdson. That’s regardless of the NAR’s knowledge that confirmed the median existing-home worth for all housing sorts in July was $403,800, a rise of 10.8% from July 2021.

“Seasonally adjusted costs are actually clearly falling, down by 1.0% in July – the third straight drop – and must fall quite a bit additional earlier than the market reaches a brand new equilibrium,” Shepherdson added.

Some latest knowledge factors have triggered alarm bells for the US housing market, with some specialists warning a correction is underway.

Earlier this week, the Nationwide Affiliation of House Builders declared a “housing recession” because of plummeting builder confidence, larger development prices and the uptick in mortgage charges.

The NAR offered a extra optimistic outlook, with the group’s chief economist Lawrence Yun noting the nation was “witnessing a housing recession by way of declining residence gross sales and residential constructing” however “not a recession in residence costs.”

The housing market has been noticeably impacted by the Federal Reserve’s latest effort to tighten financial coverage by way of rate of interest hikes.

Within the minutes from the Federal Open Market Committee’s July assembly, officers stated “housing exercise had weakened notably” and predicted that the “slowdown in housing exercise would proceed.”

Shepherdson asserted the “turmoil within the housing market alone gained’t change the Fed’s coverage path.”

“However for these on the FOMC who’re apprehensive about overdoing the tempo of tightening, it would set alarm bells ringing. On the margin, this makes it extra seemingly that the Fed will pivot to 50bp hikes in September,” he stated.

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