- Chief economist at Pantheon Macroeconomics Ian Shepherdson warned that US house prices could tumble dramatically by 2023
- Despite the current projections, he acknowledged that the housing market is not as bad as the implosion people in the US faced during the Great Recession of 2008
- He warned that the plunging trend in sales ‘has further to go’ and that prices are falling as the US enters the fourth quarter of 2022
- Shepherdson warned: ‘Housing, in short, is in recession, and everything connected to housing either is in recession now or soon will be’
Ian Shepherdson, a chief economist at Pantheon Macroeconomics, pointed out that home prices have already declined by about five percent from their peak in May and will continue to tumble.
According to his previous work, there are now 40 percent more single-family homes available than four months ago – and previously occupied home sales have slowed for the seventh month straight.
Prices for homes sank by 0.7 percent in August, but Shepherdson predicts a total decline of up to 20 percent by the middle of 2023.
He warned that the plunging trend in sales ‘has further to go’ and that prices are falling as the US enters the fourth quarter of 2022.
The recession, in effect, will encompass all aspects of the housing industry in the coming months, he claims.
Shepherdson said in a note to his clients: ‘The very low level of inventory means that a headlong collapse in prices is unlikely, but we still expect a total decline of up to 20% by the middle of next year.
‘Housing, in short, is in recession, and everything connected to housing either is in recession now or soon will be.’
Despite the current projections, he acknowledged that the housing market is not as bad as the implosion people in the US faced during the Great Recession of 2008.
This housing crash is unlikely to seep through to the rest of the US economy and cause a broader financial crisis, Shepherdson said.
Sales have fallen to the slowest pace since June 2020, which was affected by the global pandemic.
Excluding that, this current period has been the worst for home sales since 2015. NAR chief economist Lawrence Yun said that this is reflecting this year’s ‘escalating mortgage rates.’
Inflation is also hovering near a four-decade high.
Existing home sales fell by 0.4 percent last month from July, and compared to last August, the fall was 19.9 percent.
The cooling down of the once red-hot housing market is in part thanks to sharply higher mortgage rates and rising prices which made homebuying less affordable.
Current data suggests that the national median home price is now $389,500.
Previously, Shepherdson said that new home sales figures ‘closely’ follow the data on mortgage applications ‘which make it clear that demand is cratering.’
Another prominent economist, Mark Zandi of Moody’s Analytics, recently warned the housing market was on the cusp of a ‘deep freeze’ due to soaring mortgage rates.
It comes as new data from the Commerce Department published on August 23 showed that sales of new single-family homes fell by 8.1 percent last month compared to the month before, with 590,000 units sold in June.
Sales have now fallen to their lowest level since 2020, according to Reuters.
Year on year, house sales are down 17.4 percent.
The housing market is one of the sectors most sensitive to interest rates, according to experts.
Housing starts and building permits also declined further last month, but a collapse is unlikely because of a severe housing shortage.
There were 457,000 new homes on the market at the end of June, up from 447,000 units in May.
Houses under construction made up roughly 67.0 percent of the inventory, with homes yet to be built accounting for about 24.1 percent.
At June’s sales pace, it would take 9.3 months to clear the supply of houses on the market, up from 8.4 months in May.
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