According To An Expert, The Housing Market Is About To Slow Down
As spring rolls around, the popular season for buying and selling homes is just getting started, but as mortgage rates and overall home price continues to increase, the housing market is beginning to face difficulties. Higher real estate prices are leading to a high amount of hesitation amongst homebuyers, especially due to their consciousness of affordability. Earlier this year, home sales decreased by 7.2%, dropping the annual home-sales rate down to 6.02 million, according to Market Watch. As we continue down this path, Barron's states that economists predict the continuation of this drop throughout the year.
Ian Shepherdson is the founder and chief U.S. economist at Pantheon Macroeconomics (per Pantheon Macroeconomics). After a significant amount of research, he predicts that the home-sales rate will drop 25% by the end of this summer. This will take the current 6.02 million home-sales rate down to 4.5 million, but what exactly brought Shepherdson to this prediction?
Shepherdson's prediction
Shepherdson started by observing mortgage demands and found a significant drop. The Mortgage Bankers Association showed an 8% decrease in home loan applications for purchasing homes, according to its most recent data analysis. Accompanying this drop, refinancing demands have also dropped 50% since last year. The affordability of homes might be the most realistic thing to blame for this drop. Especially since September, when the median mortgage rate rose by 27%, per Realtor.com.
Most price inclines in the housing market due to a significant lack of housing inventory. This makes the few houses that are for sale rise significantly in prices, causing a lack in overall buyers. Fortune shows that Shepherdson believes that the more the market slows, the fewer home sellers will be willing to put their houses on the market because people resist selling their homes in a dropping real estate market. This could lead to even bigger problems, increasing the current issue further than expected.