free webpage hit counter

Economists say US housing recession could drop home prices by 20%

US home prices are finally falling from record highs earlier this year and could fall as much as 20% by mid-2023, according to top economists.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in an analyst note published this week that house prices had already fallen 5% from their May peak. Their projections show that seasonally adjusted existing home sales fell 0.7% in August, the third monthly decline.

“The downward trend in sales has to go further and prices are falling,” Shepherdson wrote in a note.

Painfully high inflation and rising borrowing costs have proven to be a lethal combination for the housing market, forcing potential buyers to scale back spending. Many experts – including Shepherdson – agree that the housing market is now experiencing a recession.

The US is in a housing slump: What it means

Housing market

Homes in the Harris Ranch community of Boise, Idaho, US on Friday, July 1, 2022. (Getty Images/Jeremy Erickson/Bloomberg via Getty Images)

But unlike the 2008 housing collapse that helped fuel the broader global financial crisis, the current recession is unlikely to ripple through the rest of the US economy. That’s because the market has fewer entrenched risks compared to the housing bubble of the mid-2000s.

“The very low level of inventory means that a huge drop in prices is unlikely, but we still expect a total drop of up to 20% by the middle of next year,” Shepherdson said.

Billionaire David Rubenstein Warns Fed ‘Hard’ to Reduce Inflation

Painfully high inflation and rising borrowing costs have proved a lethal combination for a once red-hot housing market, forcing potential buyers to hold back on spending.

Home mortgage

A For Sale sign is posted in front of a property in Monterey Park, California on August 16, 2022. (Photo by FREDERIC J. BROWN/AFP/Getty Images)

The Federal Reserve It is tightening policy at its fastest pace in three decades as it tries to tame runaway inflation. Policymakers have voted to approve five consecutive interest rate hikes this year, including three consecutive 75-basis-point hikes in June, July and September. At the end of his latest meeting this week, Chairman Jerome Powell indicated that another 125 basis points of rate hikes were on the table this year.

According to Freddie Mac, the rate hike for a 30-year fixed mortgage was the highest since the 2008 recession by more than 6%.

With mortgage rates rising, demand for new homes is quickly drying up, prompting home prices to fall.

Fed Chairman Jerome Powell

US Federal Reserve Chair Jerome Powell attends a news conference after the Federal Open Market Committee (FOMC) meeting on September 21, 2022 in Washington, DC. ((Photo by Chen Mengtong/China News Service via Getty Images)/Getty Images)

Click here to read more about Fox Business

The National Association of Realtors said in a new report Wednesday that home prices fell slightly to $389,500 from a median of $413,800 recorded in June. However, home prices are up 7.7% from the same time a year ago, marking the 126th consecutive month of year-over-year home price increases. That’s the longest streak on record.

Leave a Reply

Your email address will not be published.

Previous post Opinion | Stop Asian Americans paying the price for campus diversity
Next post Disney’s Victoria & Albert’s $110 Price Increase Irks Diners