- Inflation has risen, but some measures remain strong.
- Housing activity has suffered greatly from the Feds’ inaction against inflation.
- This means that US home prices are currently on a downwards trajectory, even if there is no recession.
A strange dynamic is taking place in the housing market. This could be a sign of a new market. Home prices will dropEven if the US does not enter a recession, it will be evident that the US will continue to grow in the months ahead.
This is because the Federal Reserve continues raising interest rates. Mortgages are becoming more expensive.This has caused buyers to put off their purchase plans. Falling home pricesAs a consequence.
Cris DeRitis, Moody’s Analytics’ deputy chief economist, has taken this as a reason to predict that home prices will moderate even without a recession.
Mark Zandi (the chief economist at Moody’s), says that price moderation may increase as inflation battles continue.
“The housing market is the most interest-rate-sensitive sector of the economy,” Zandi said in a Housing report. “It’s at the frontlines of the fallout from Fed’s efforts in bringing down inflation.”
Although some cities have seen a decline in their prices, the housing cost is still much higher than what most Americans can afford. They are also facing mortgage rates that are almost as high as they were before. DoubledIn the last year. According to some economists, overall costs are at a peak and will continue to rise. As spring approaches, the decline is evidentDespite the fact that the US jobs market is strong and President Joe remain in office, this does not mean that there are any significant changes. Biden remains optimisticThe country will not go into recession.
“There will be a coast-tocoast downturn on the housing market. Zandi stated that it would be “brutal”. “No market part is immune.”
The “brutal” downturn may be bad news for real-estate investors and sellers looking to sell their properties, but it can be a welcome relief for potential buyers who were previously excluded from the market.
Prices and rents for homes are rising
There are more buyers watching the sidelines, so data from the S&P Dow Jones IndicesIt shows that price growth is possible Turned negativeSix major metropolitan areas saw a dramatic shift in home-buying frenzy between April and July.
Three of the six California cities with lower July home prices than April were located in California during those months. Los Angeles, San Francisco and San Diego all saw negative price growth in this time period.
Inflationary pressures have had the opposite impact on rental prices, which continue to climb — although growth is now moderating.
According to rent.comThe US median rental price of a one-bedroom unit in August was $1,721; this is down 2.77% from the previous months, but up 27.13% compared to one year earlier. Price of a two-bedroom unit rose 23.43% over the past year to $2054.
The rise in rents is contributing to economic volatility. Bloomberg reported that the consumer price index — an inflation measure that excludes food and energy — is projected to return to a four-decade high when numbers for September are released on Thursday, partially due to rising rents.
Michael Feroli, the chief US economist at JPMorgan Chase & Co told Bloomberg that although core inflation has likely peaked, housing is helping to keep inflation elevated.
Feroli stated that “we’re probably close to a peak” but added, “I don’t believe we’re going to have a quick return to lower numbers due in part, because of the persistent rental inflation.”
Inflation in rental prices could lead to an increase in Another major interest-rate increase from the Federal Reserve next month, which could drive up mortgage rates even higher and further escalate the housing downturn — Economic recession with or without.
Insider has been told by Sam Khater (Freddie Mac’s chief economist) that mortgage rates are being affected by uncertainty and volatility in financial markets. Khater stated in a separate statement that house prices have been falling due to higher interest rates.
