Moody's Analytics chief economist Mark Zandi is ready to call it. He tells Fortune that we've officially moved from a housing boom into a "housing correction."
The real estate data rolling in for April and May shows that the U.S. housing market is softening. New home sales fell 19% to their lowest level since April 2020. Redfin reports 19% of home listings cut their price over the past month. Inventory is rising fast, while mortgage applications and existing home sales are also falling.
This drop-off isn't a result of seasonality, or a soft month or two. Zandi says it's a trajectory flip: Demand is pulling back—fast—in the face of mortgage rates that have spiked dramatically.
"The housing market has peaked…everything points to a rolling over of the housing market," Zandi says. "In terms of home sales, they're falling sharply. Housing demand is coming down fast. Home price growth [will] go flat here pretty quickly; we will see [home] price declines in a significant number of markets."
Unlike a stock market correction, which means a greater than 10% drop in equities, Zandi says a "housing correction" means the end of the housing boom and the beginning of a period where home prices will fall in some regional markets. Over the coming 12 months, he expects year-over-year home price growth to be 0%. If that comes to fruition, it'd mark the worst 12-month stretch since 2012. It would also be whiplash for real estate agents and brokers who've watched home prices soar 19.8% over the past year.
This is all by design. The Federal Reserve has a dual mandate from Congress: Keep both unemployment and inflation low. Of course, with the jobless rate at 3.6% and the latest CPI reading at 8.3%, it's obvious which mandate the Fed has shifted its attention to: inflation. In the Fed's mind, if it can end the housing boom, it can slow down overall price growth. That's why the Fed hit the housing market with an economic shock of higher mortgage rates.
Keep reading on Fortune.com
Related Links
Gen-Zers Are Indeed Buying Houses in the City Predicted to Be Most Popular in 2022
7 Home Remodeling Projects with the Best Return on Your Investment
If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.
