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Why the ‘floor is coming’ for US housing market: economist

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The U.S. housing market is likely to bottom out after months of plunging buyer demand and falling home prices, a prominent economist said in a note to clients this week.

Loss of confidence in home builders According to the National Association of Home Builders monthly survey, November marked the 11th straight month of declines and the lowest level since June 2012 outside of the COVID-19 pandemic.

Sentiment in the housing sector fell sharply during this year’s massive rise in mortgage rates. It topped 7% earlier this month on his 30-year fixed-rate loan before slipping back to 6.61% last week. The chief of Pantheon Macroeconomics, his economist Ian Shepardson, argued that mortgage rates appear to be stable.

“The good news for homebuilders is that floors are coming,” Shepardson said. “Mortgage rates have peaked and, although at very depressed levels, suggest that demand will level off in the coming months.”

Some economists predict that house prices could fall 20% from this peak.
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“Therefore, we expect housing starts and sales to bottom out early next year, even as house price declines accelerate,” Shepardson added.

The housing market has experienced a significant slowdown in recent months as a sharp rate hike by the Federal Reserve caused mortgage rates to surge. High monthly mortgage payments add to the financial pain for homebuyers already facing high prices and decades of high inflation.

Sales activity could bottom out soon, but Shepardson said home prices “recently started to fall in consecutive months.”

housing market
Mortgage rates soared this week.
AFP via Getty Images

Soaring mortgage rates Squeezing buyer demand, many potential sellers were forced to lower their listing prices to attract interest.

Jerry Conter, president of the National Association of Home Builders, said: “Demand for new homes is significantly weakening as rising interest rates make buyer traffic increasingly scarce.

as the post reportedShepardson predicted in October that U.S. house prices could fall by up to 20% over the next year as the housing adjustment unfolds.

housing market
Buyer demand has plummeted in recent months.
APs

Similarly, researchers at the Dallas Federal Reserve have said in a recent report that mortgage rates have been “boosted.”[ed] Potential for a serious housing price adjustment. The researchers noted that prices could fall by 20%.

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