According to Fannie Mae, the US housing market will experience its steepest sales decline since 2011.
According to Fannie Mae, there will be the greatest drop in US house sales since 2011.
The government-sponsored mortgage lending institution predicted that this year’s total home sales will plummet to only 4.8 million, the lowest level since 2011. According to experts at Fannie Mae, that number will only marginally increase in 2024, when total house sales are predicted to reach 4.9 million.
According to data from Freddie Mac, the average rate on a 30-year fixed mortgage increased over the past week to 7.18%, which may be contributing to the sales decline. The cost of borrowing is therefore at its highest level since 2001, which has significantly hampered demand over the past year.
The US economy is deteriorating, and Fannie Mae economists expect it to slow down in the first part of next year. These dynamics are developing against that backdrop. In an effort to reduce inflation, the Fed has rapidly raised interest rates during the past year. However, analysts have cautioned that this action may cause the economy to enter a recession.
Although central bankers will probably lower interest rates in the case of a downturn, which could cause mortgage rates to drop, a deteriorating labour market and tight credit conditions will probably hurt housing demand, according to a previous note from Fannie Mae.
And there are already indications that the economy is slowing down. Although still healthy consumer spending has been cited by optimists who claim that the US is on pace to avert a recession, Fannie Mae noted that present patterns appear unsustainable when taking incomes into account. Although real disposable personal income fell by 0.2% in July, real personal consumption expenditures increased by 0.6%.
The most recent information on credit card transactions and auto sales, which shows a weakening US consumer with a 4.6% drop in automobile sales last month. Along with wage growth slowing, the personal savings rate fell to 3.5% in July, a hint that the consumption supporting the US economy is going to slow down.
Additionally, updated economic data paint a poorer image of the US economy than previously believed. According to the Bureau of Economic Analysis, real GDP for the most recent quarter was revised down to 2.1%, down from the first estimate by 0.3 percentage points.