Axios explained that after the sales of existing homes dropped for the ninth straight month, the supply of single-family homes is continuing to grow, and the mortgage rates are nearing seven percent; some experts are saying that a “large-scale housing slowdown” is starting to become more and more likely.
The publication explained in October:
Home prices are mostly too high to appeal to buyers, who are facing skyrocketing mortgage rates. But sellers are loathe to lower asking prices. Sales are cratering — some folks are just walking away from deals.
As a result, Kieran Clancy, a senior U.S. economist at Pantheon Macroeconomics, said, “In one line: Collapse in prices is coming.” According to Axios, Pantheon estimated that the existing home prices will continue to fall by roughly 20 percent from their June peak, which was around $414,000.
Additionally, analysts at Goldman Sachs had recently slashed their expectations of home prices from being roughly flat next year to being down four percent. Goldman Sachs also noted that there would be “unsustainable levels of housing affordability to continue weighing on housing demand.”
The publication noted in the report that economists, until recently, had laughed at the possibility of a nationwide price slump and had ultimately implied that “persistently low inventories of houses to buy would put something of a floor under the market.”
However, Axios explained that analysts are “coming around” to the notion that housing prices could see a “correction” but still do not expect to see an “outright bust”:
- Unemployment remains low. And most homeowners who bought in recent years have locked in rock-bottom rates, making their payments affordable.
- That means a surge in defaults — like the one that crashed the U.S. housing market in 2008 and 2009 — is unlikely, economists say.
Ultimately, the report explained that the bottom line is: “Some decline in home prices is likely in the offing. It won’t be a disaster. And lower prices will be welcomed by frustrated, would-be buyers.”