The US housing market is seeing its worst contraction since 2006 as mortgage applications crumble, says Freddie Mac economist

The US housing market is going to get worse than it was in 2006 according to a Freddie Mac economist.

The US housing market is in the early stages of a contraction. Mortgage applications are pointing to a decline over the summer, despite it not showing up in many data series. Purchase apps have fallen from the peak.

He said that during the coronaviruses epidemic, mortgage applications plummeted, but they came back after a while. The current state of the US economy isn't likely to change that.

In the spring of 2020, applications fell 40%, but came roaring back in a few days. The current environment is not likely to see a rebound like that.

The Federal Reserve raised interest rates to control inflation. As consumer prices surge, the Fed has deployed more aggressive monetary policy, lifting the benchmark interest rate to 0.5 percentage points last month in its first double-sized rate hike and is set for a series of similar sized increases this year.

As a result of that, potential buyers have been priced out as home prices and mortgage rates increase. With the US economy predicted to enter a recession in the next year, American homeownership is likely to get harder.

According to the National Association of Realtors, housing affordability fell a record 29% over the last year as mortgage rates and housing prices went up.

The economist said US mortgage applications are in a state of disrepair. The Mortgage Bankers Association said that applications for new purchases fell in the week leading up to June.

Ian Shepherdson is the chief economist of Pantheon Macroeconomics.

It's never been a worse time to buy a home according to a survey.

Doug Duncan, senior vice president, and chief economist at Fannie Mae, said in a statement that consumers' expectations that their personal financial situations will get worse over the next year reached an all-time high in the May survey.