• Live
    • Audio Only
  • google plus
  • facebook
  • twitter
News > U.S.

News Analysis: Is a US Housing Crash on the Horizon?

  • Robin Azougi (1st R), a licensed real estate salesperson with Douglas Elliman Real Estate, talks with prospective buyers at a house for sale in Floral Park, Nassau County, New York, the United States, on Sept. 6, 2020.

    Robin Azougi (1st R), a licensed real estate salesperson with Douglas Elliman Real Estate, talks with prospective buyers at a house for sale in Floral Park, Nassau County, New York, the United States, on Sept. 6, 2020. | Photo: Xinhua/Wang Ying

Published 11 April 2022
Opinion

Some experts insist that today's U.S. housing market comparisons to that of the mid-2000s are inaccurate. However, they view the pace of home price acceleration as slowing down in the coming months amid interest rate hikes and as home buyers deal with food and gas inflation.

Experts believe the U.S. real estate sector is headed for a correction, in one form or another. Will the market see a major nosedive, a mild tweak, or something in between?

RELATED:
 Venezuela: Strengthening of Great Housing Mission

Home prices have seen a major surge since the COVID-19 and the summer unrest in 2020 sparked a massive exodus of high-earning professionals from cities nationwide.

After hightailing it out of urban areas, many have opted for life in smaller cities or suburbs. That caused a surge of home buying, which led to a sharp rise in home prices in areas with less crime and more living space.

Indeed, median home prices have climbed as much as 27 percent since spring 2020, according to figures from the U.S. Census Bureau, as well as the Department of Housing and Urban Development.

That begs the question of whether those high prices will come back down.

Desmond Lachman, a resident fellow at the American Enterprise Institute, noted that over the past three months, U.S. mortgage rates have risen by 1.5 percent - their fastest pace since 1994.

"This is bound to cause the housing market to cool sharply both in terms of price increases and in terms of building activity," Lachman told Xinhua.

However, this is unlikely to lead to the same sort of disruption as in 2008, given the lesser amount of speculation now, as well as the absence of the subprime prime lending that was prevalent at that time, Lachman said.

That counters the comparison being made by some media - that the country is headed for another massive housing crash like the one in 2008, which sparked the most severe recession since the Great Depression nearly 100 years ago.

UBS Global Wealth Management chief investment officer for the Americas Solita Marcelli, and top equity strategist for real estate for UBS Financial Services Jonathan Woloshin, said in a note last week that comparisons of today's market to that of the mid-2000s are inaccurate.

"We believe there are a number of factors that differentiate today's housing market from that of the mid-2000s," the two experts said, as quoted in Business Insider, a major U.S. business publication.

"This is not 2008," the two argued.

The lead-up to the 2008 housing crash was characterized by millions of Americans signing up for mortgages they could not repay, which ultimately resulted in economic catastrophe that rocked the global financial world.

However, Marcelli and Woloshin view the pace of home price acceleration as slowing down in the coming months, amid interest rate hikes and as home buyers deal with food and gas inflation, Business Insider noted.

If there is a sharp slowdown in housing activity, that could contribute to an economic recession later this year, Lachman argued.

This is likely to coincide with a bursting of the U.S. equity and credit market bubbles as the U.S. Federal Reserve moves to a more hawkish monetary policy stance, Lachman said.

John Blank, chief equity strategist and economist at Zacks Investment Research, noted that company profits are at all-time highs, contributing to a strong stock market, which he expects to remain for at least a 12-month period.

But it remains unclear what will occur after that, Blank told Xinhua.

"That all depends on whether there's a housing market bust or not," he said.

With record-housing prices and the U.S. Federal Reserve transitioning to higher rates, "you've got an unaffordability crunch coming," he said.

"We're not yet seeing that spike in mortgage costs play out. And when it does, then we've got another price crash. That's when I get worried," he said.

Comment
0
Comments
Post with no comments.