Fannie Mae has warned that the downturn in the US housing market is not going to end anytime soon.
This is because mortgage rates are set to remain high if the US avoids a recession.
Even if the US slips into recession, tough financial conditions will still affect home sales.
The housing market will not be emerging from its deep freeze anytime soon, even if the US economy manages to pull itself out of recession next year, according to economists at Fannie Mae.
The government-sponsored mortgage giant highlighted the sluggish housing market in the US, with existing home sales falling 18.9% year-on-year in June, according to Fannie Mae estimates. Likewise, mortgage applications fell to their lowest levels in 28 years.
This slowdown was largely due to rising mortgage rates, which drove buyers and sellers out of the market. This is likely to continue regardless of what happens to the US economy over the next 12 months, the company said in a statement NB Wednesday.
“With a continued shortfall in the supply of existing homes for sale and the recent hike in the 30-year mortgage interest rate to around 7%, we expect home sales in 2023 to remain near the lowest annual level since 2009,” said Fannie Mae economists. . “Regardless of whether a soft landing occurs over the next year, we expect existing home sales to remain weak and within a narrow range.”
This is because the US avoiding a recession means that real interest rates in the economy are likely to remain high, which will influence mortgage rates to remain high as well. Rising interest rates had a significant impact on the housing market Over the past year, buyers have criticized the high cost of borrowing and Discourage sellers from listing their properties For sale, many of which have been financed at very low rates for years.
If the US falls into a recession, interest rates are likely to fall “somewhat,” the company estimates, which could cause mortgage rates to drop slightly, but the housing market is likely to stagnate. weakening of the labor market And The ongoing crisis in credit conditionsIn addition to the decline in consumer confidence.
“Therefore, we do not expect a meaningful recovery in existing home sales over our forecast horizon under any of the most likely scenarios,” said Fannie Mae.
Despite growing optimism about a soft landing in the US, he predicted the economy would finally slip into recession in 2024, with real GDP falling 0.2% year-on-year by the fourth quarter.
Experts say housing conditions are unlikely to improve until mortgage rates are back in the 5% range. the The average interest rate for a 30-year fixed mortgageMeanwhile, it rose to 7.48% in the past week, according to Mortgage News Daily, marking a 23-year high.
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