The slowdown in the American real estate market is not about to stop, Fannie Mae has warned.
Indeed, mortgage rates are expected to remain high if the United States avoids a recession.
Even if the United States enters a recession, tight financial conditions will still weigh on home sales.
The housing market won’t come out of its freeze anytime soon, even if the U.S. economy manages to avoid a recession over the next year, according to Fannie Mae economists.
The government-sponsored mortgage giant highlighted the stagnation of the U.S. housing market, with existing home sales down 18.9% year over year in June, according to Fannie Mae’s estimate. Likewise, mortgage applications fell to their lowest level in 28 years..
This slowdown was largely driven by high mortgage rates, which pushed buyers and sellers out of the market. This trend is expected to continue regardless of what happens to the U.S. economy over the next 12 months, the company said in a statement. note in August.
“With a continued limited supply of existing homes for sale and the recent rise in the 30-year fixed mortgage rate to around 7%, we expect home sales in 2023 to remain near the lowest annual level since 2009,” they said. Fannie Mae economists. . “Regardless of whether a soft landing is achieved in the year ahead, we expect existing home sales to remain subdued and range-bound.”
Indeed, if the United States avoids a recession, it means that the economy’s real interest rates will likely remain high, which will also incentivize mortgage rates to remain high. The rise in rates has weighed heavily on the real estate market over the past year, as they blame buyers for a high cost of borrowing and discourage sellers from listing their properties for sale, many of which were financed at ultra-low rates years ago.
In the event the United States enters a recession, interest rates would likely decline “somewhat,” the company estimated, which could lead to a slight decline in mortgage rates, but the housing market would still be affected by a weakening of the labor market And one continuing crisis in credit conditionsin addition to shaken consumer confidence.
“We therefore do not expect a significant recovery in existing home sales over our forecast horizon under any of the more likely scenarios,” Fannie Mae said.
Despite growing optimism about a soft landing in the United States, he forecasts the economy will eventually slide into a slowdown in 2024, with real GDP falling 0.2% year-on-year in the fourth quarter.
Experts say housing conditions are unlikely to improve until mortgage rates return to the 5% range. THE average rate on 30 year fixed mortgagemeanwhile, rose to 7.48% last week, according to Mortgage News Daily, touching a 23-year high.
This story was originally published in August 2023.
Read the original article on Business Insider