The Housing Market Could Be On Track for a Substantial Downshift, One Analyst Says
An uptick in mortgage interest rates could price out a large share of buyers and lead to market deceleration in just a few short months
March 22, 2022
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While many economists and homebuyers are holding their breath as prices rise ahead of a busy spring buying season, one market expert suggests that a slowdown could be just around the corner, MarketWatch reports. Ian Shepherdson, chief economist and founder of research consulting firm Pantheon Macroeconomics, predicts that existing-home sales will drop 25% from 6.02 million in February to 4.5 million by the end of summer 2022.
Shepherdson points to a drop in mortgage demand as the trigger for upcoming deceleration, meaning that a lack of affordability will push more buyers out of the housing market and cause a subsequent decline in prices.
The ripple effects of a shift in existing-home sales would be far-reaching, Shepherdson said, arguing that the pace of rent increases would eventually slow and perhaps even reverse. It also would spread to new-home sales, which he expects will likewise fall. A decrease in new-home sales would represent a downward drag on GDP, since that would implicate less demand for services tied to home-building and less spending on items like building materials and appliances.
