According to an economist at the Pantheon Macroeconomics, US home prices are going to fall even more steeply as demand for new houses increases.
AFP | Getty Images via Business Insider Ian Shepherdson, chief economist at Pantheon Macro, said in a note to clients that the next few months will be difficult.
The data on US new home sales for June will be released Tuesday. Sales are expected to have fallen from May.
Shepherdson said he is expecting a drop of more than half a million. In August 2020, new home sales surpassed 1 million.
He said that the mortgage application numbers made it clear that demand is cratering.
Shepherdson said prices are likely to fall sharply because of the ongoing fall in sales.
After a 0.4% fall in May, Pantheon Macro estimated that single- family existing home prices dropped by 1.8% in June.
The market is adjusting to a new reality with a lot of inventory. The prices have to adjust to the downside.
The US housing market boomed in 2020 and 2021, as central banks slashed interest rates and people moved to more spacious properties during the coronaviruses epidemic. Between February 2020 and April 2022.
The Federal Reserve and other central banks are raising interest rates in order to fight inflation. Demand for mortgages and house purchases has been affected by that.
Last week's update of the Mortgage Bankers Association's market index shows that US mortgage applications plummeted to their lowest level since 2000.
Freddie Mac reported last week that the average 30-year mortgage rate was close to 5%. The rate was more than double a year ago.
Some economists and analysts are concerned about the slowing of the US housing market.
In an interview with Insider this week, an economist at Interactive Investor said he expects US home prices to fall 25% from their peak to trough.
Many analysts say that banks back then were engaged in riskier lending practices.
According to a note to clients last month, the COVID boom is nothing like the early-2000s bubble.
He said that when existing homeowners have overextended themselves and are vulnerable to a sudden hike in their servicing costs, a crisis will occur.
Even if the end of the COVID boom causes a decline in house prices, it's not likely today.
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