The housing market isn’t recovering yet, and home sales will notch a new low, Pantheon Macroeconomics said. That’s due to high mortgage rates, which have continued to shut out buyers and sellers from the market. Experts don’t expect the cost of borrowing to ease meaningfully anytime soon, postponing a recovery in housing. Loading Something is loading.
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Home sales are set to slump to a new low, as the US housing market can’t start recovering so long as mortgage rates stay elevated, Pantheon Macroeconomics’ chief economist Ian Shepherdson said.
“We are baffled by the emerging narrative in the commentariat that housing is now recovering, because it isn’t,” Shepherdson said in a note on Tuesday, pointing to growing optimism for a housing market recovery as mortgage rates pull back slightly.
The average rate on the 30-year-fixed mortgage moved 6 basis-points lower to 7% over the past week, according to Bankrate’s most recent survey.
Meanwhile, mortgage applications increased 7% in the week leading up to June 9, per Mortgage Bankers Association data, and sales of new homes have jumped 20% over the last seven months.
But Pantheon said that doesn’t change the bigger picture in the housing market, which is that a durable recovery won’t happen until affordability improves..
Mortgage rates are still hovering near a 20-year-high, and a recovery in home sales is unlikely until mortgage rates begin to drop more meaningfully, Shepherdson said.
But experts have forecasted rates to stay high at least through 2023. Redfin estimates that mortgage rates will pull back to just 6% by the end of the year.
“The bulk of the drop in homes prices is yet to come; the lagged effect of the plunge in sales points to a steep and sustained drop,” Shepherdson said. “The housing market is not in the early stages of recovery; the downturn merely is morphing from a collapse in demand, sales, and construction, to falling prices and housing-related consumption spending,” he later added.
Experts have sounded the alarm on the US housing market, as higher rates have shut out both prospective buyers and sellers from the housing market, which have sent sales lower and prices higher.