The U.S. housing market is likely to enter a “deep recession,” according to new guidance from credit bureau Fitch.
Fitch forecasts that if the housing market were to fall significantly, US house prices could fall by 10% to 15% and housing activity could fall by about 30% or more over the next few years.
“There is a growing likelihood that the US housing market will enter a deep recession. It is assumed.” Fitch analysts said in a release on tuesday.
A serious downtown is “possible, but not yet likely,” the agency said, adding that a slight slowdown is still the most likely outcome for the housing market. He said he had confirmed a “stable outlook” for builders.
Fitch cites several factors as “key indicators” of the health of the housing market, including US GDP growth, unemployment, consumer confidence and housing affordability.
The firm warned, “We may lower our rating case forecasts if trends weaken more than expected.”
In addition, Fitch suggests that a housing market “stress case” in the event of a sharp recession could see homebuilder deliveries decline by about 20% in 2023 and about 10% in 2024. said. In that case, the average selling price of U.S. homes “falls by a mid- to high-single-digit percentage each year.”
“Builders who have not built adequate cash reserves during a recession will need to issue debt to rebuild their inventory positions when housing recovers, which could boost credit metrics,” analysts said. added.
U.S. GDP is the broadest measure of economic activity, and more recently Decreased for 2 consecutive quarters. Economists widely see two consecutive quarters of declining GDP as a sign of recession.
Warnings of a potential housing market downturn have surged in recent months as the Federal Reserve tightened monetary policy. Mortgage rates have nearly doubled since January, sparking an affordability crisis for future homebuyers.
Earlier this week, the National Association of Home Builders Declaration of a “housing recession” After eight straight months of declining builders confidence.
“Tight monetary policy by the Federal Reserve and continued rising construction costs have led to a housing recession,” said Robert Dietz, chief economist at NAHB.
In July, Ian Shepherdson, chief economist at Pantheon Macroeconomics, said house prices were Likely to fall “very significantly” That’s because demand is “exploding” among cash-strapped homebuyers.
At the time, Shepardson said prices were likely “15% to 20% overstated” relative to income.