House prices have already fallen at their fastest pace in decades and could fall another 20% next year as mortgage rates rise, according to one celebrity. wall street economist.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in an analyst note released last week that there was “no bottom in sight” on the decline in home sales as mortgage rates approached 7% for the first time since 2001. Next year he will plummet from 15% to 20%.
“We expect home sales to continue to decline through early next year,” Shepardson wrote in a note. “By that point, sales will have fallen to an incompressible minimum level where only those who have no choice but to go home due to work or family circumstances.”
Second-hand home sales Data released last week by the National Association of Realtors (NAR) showed that September had already fallen 1.5% from the previous month, reaching an annualized rate of 4.71 million units. On a yearly basis, home sales last month he plunged 23.8%.
Painfully high inflation and rising borrowing costs are proving to be a deadly combination for the housing market, forcing potential buyers to hold back on spending.
Many experts, including Shepardson, believe the housing market is currently experiencing a recession It will get worse as the Federal Reserve continues to raise interest rates.
“If you plan to move house and need a new mortgage, you will face a significant increase in interest rates,” Shepardson said. “Even for those who want to trade in, there is a good chance that the monthly payment will increase.
of federal reserve Trying to contain runaway inflation. Policymakers have voted to approve his fifth consecutive rate hike this year, including his third consecutive 75 basis point rate hike in June, July and September.
At the end of last month’s meeting, Fed Chairman Jerome Powell suggested that another 125 basis points of rate hikes were under consideration this year.
Thanks to rate hikes, the average 30-year fixed mortgage rate has already reached 6.94%, double what it was just a year ago, according to Freddie Mac.
As mortgage rates rise, demand for new homes quickly dries up, driving home prices down.