““I do not think that home sales will stop completely. They just want to slow down. People will still be able to sell homes, but it may take you a little longer than it has been.”
The American housing sector is in the middle of the biggest decline in over a decade, says an economist. But do not expect prices to fall back to earth yet.
“The U.S. housing market is at the beginning of the most significant decline in activity since 2006,” said Len Keifer, Deputy Chief Economist at Freddie Mac FMCC.
“It has not appeared in many data series yet, but mortgage applications point to a large decline over the summer,” he explained. He said that mortgage applications are down 40% from the last peak in 2021.
Purchase and refinancing applications are actually down to the lowest level in 22 years.
Mortgage applications as a data point “give you a sense of where the market may be heading,” Keifer said in an interview with MarketWatch, “because it’s the early stages when people are looking to buy a home. And if the number of applications falls, it has tends to indicate that in a month, and a month and a half, the origin of mortgages will also decline. “
Keifer expects that home sales from now on will “slow down quite a bit over the summer.”
Meanwhile, Freddie Mac data released Thursday morning revealed that mortgage rates have risen, on the back of rising interest rates and inflation.
To be clear, “I do not think home sales are going to stop completely,” Keifer stressed. ‘They just want to slow down. People will still be able to sell homes, but it may take you a little longer than it has been. “
Would prices fall as a result of a “contraction”?
While some may jump to the conclusion that weaker data represents a possible fall in house prices, experts warn otherwise.
“Does this mean that house prices will fall? I do not think so, said Keifer.
Freddie Mac’s research shows that when interest rates go up, while home sales and mortgages go up, house prices will not necessarily fall or ladder. “They tend to be more sticky,” Keifer said.
“And while growth rates tend to slow, they do not tend to fall,” he added.
Write to: firstname.lastname@example.org