Urgent Warning from Leading Economist: Housing Market Crisis Deepens as Homebuilders ‘Throw in the Towel’

The housing market is facing a significant downturn, and experts are concerned about its impact on the economy. Mark Zandi, chief economist at Moody’s Analytics, recently raised alarms about the situation. After initially signaling a warning, he now believes the situation has worsened.

Zandi warns that home sales, construction, and prices are all expected to decline unless mortgage rates, currently near 7%, drop significantly soon. However, that seems improbable.

In May, existing home sales saw a surprising uptick, but they still hit the lowest sales level for that month since 2009. New home sales were not faring better—falling by 13.7% compared to April. Meanwhile, single-family housing starts also dipped 4.6% in June.

Builders are feeling the strain too. Zandi notes that many builders are withdrawing from the market because it’s too costly to keep supporting sales through rate buydowns. This is evident as builders delay purchasing land and cut back on new projects.

Home prices, which have held steady, are also at risk of decline due to these high mortgage rates. Recent data from the Case-Shiller index shows a slight drop in home prices, reflecting sluggish market conditions.

In July, a survey by the National Association of Home Builders revealed that 38% of builders had to lower their prices, an increase from previous months. This comes amidst a rise in home listings, as even those with favorable pre-pandemic mortgage rates are considering selling.

Current market conditions are affecting homeowners too. More are taking their homes off the market after not finding buyers at their asking prices. In fact, delistings surged by 35% year-to-date and 47% year-over-year in May, according to a report from Realtor.com.

With these trends, Zandi believes the housing sector will soon drag down broader economic growth. The National Association of Realtors echoed this concern, noting that such a housing slump can lead to job losses and reduced consumer spending, leading to economic contraction.

A historical look shows that residential investment often signals economic trends. For instance, economist Ed Leamer noted this back in 2007. As mortgage rates stay high, Citi Research warns that housing may soon become a dead weight for the economy.

In summary, the housing market is in a precarious state. With slow sales, rising listings, and stagnant prices, the potential fallout for the economy could be substantial. For continuous updates and data, you can refer to Realtor.com for in-depth market analysis.

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home builders,Home Prices,Housing