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Prepare yourself: “The US housing market is in the early stages of its sharpest decline in activity since 2006”

“I don’t think home sales will come to a complete halt. You will only slow down. People will still be able to sell houses, but it may take a little longer than before.’


– Len Keifer, Deputy Chief Economist at Freddie Mac

The US housing sector is in the midst of its biggest slowdown in over a decade, an economist says. Don’t expect prices to bottom out just yet, though.

“The US housing market is in the early stages of its sharpest decline in activity since 2006,” said Len Keifer, deputy chief economist at Freddie Mac FMCC.
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“It hasn’t appeared in many data series yet, but mortgage applications are pointing to a sharp drop over the summer,” he explained.

Indeed, purchases and refinance requests have fallen to their lowest levels in 22 years.

Mortgage applications as a data point “gives you a sense of where the market might be headed,” Keifer said in an interview with MarketWatch, “because those are the early stages when people want to buy a home. And if application volume falls, that tends to indicate that in a month and a half, mortgage origination will also fall due to housing closures.”

Keifer expects home sales to “slow down quite a bit over the summer” going forward.

Meanwhile, Freddie Mac data released Thursday morning showed that mortgage rates have risen on the back of rising interest rates and inflation.

To be clear, “I don’t think home sales are going to stop completely,” Keifer said. “They’re just slowing down. People will still be able to sell houses, but it may take a little longer than before.”

Would prices fall as a result of a “contraction”?

While some may conclude that weaker data represents a possible decline in home prices, experts are cautioning against it.

“Does this mean house prices will plummet? I don’t think so,” Keifer said.

Research by Freddie Mac shows that home prices don’t necessarily fall when interest rates rise while home sales and mortgage lending rise or rise. “They tend to be stickier,” Keifer said.

“And while the growth rate tends to slow down, it’s not slowing down,” he added.

Write to: aarthi@marketwatch.com

https://www.marketwatch.com/story/prepare-yourself-the-u-s-housing-market-is-at-the-beginning-stages-of-the-most-significant-contraction-in-activity-since-2006-11654806265?rss=1&siteid=rss Prepare yourself: “The US housing market is in the early stages of its sharpest decline in activity since 2006”

Brian Lowry

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