The housing market is getting so weak that it\u2019s poised to become a significant drag on overall economic growth, according to Moody\u2019s Analytics chief economist Mark Zandi.<\/p>\n
In a series of posts on X<\/a> last week, he noted that he sent off a \u201cyellow flare\u201d on the housing market just a few weeks ago but now thinks a \u201cred flare\u201d is more appropriate as the outlook is already deteriorating.<\/p>\n \u201cHome sales, homebuilding, and even house prices are set to slump unless mortgage rates decline materially from their current near 7% soon,\u201d Zandi warned. \u201cThat, however, seems unlikely.\u201d<\/p>\n Existing home sales unexpectedly rose in May, but still marked the slowest sales pace for any May since 2009, further evidence that the typically busy spring selling season has been a bust.<\/p>\n Meanwhile, sales of new single-family homes sank 13.7% in May from the prior month, and single-family housing starts dropped 4.6% in June, with permits down as well.<\/p>\n \u201cHome sales are already uber depressed, but homebuilders providing rate buydowns had been propping sales up,\u201d Zandi said. \u201cThey are giving up. It\u2019s simply too expensive. A big tell is that many builders are delaying their land purchases from the land banks. New home sales, starts, and completions will soon fall.\u201d<\/p>\n He added that home prices had also held up well, but are now going sideways and set to turn lower as near-7% mortgage rates crush demand.<\/p>\n In fact, the latest Case-Shiller home price<\/a> report showed a 0.3% monthly fall in the 20-city index in April, steeper than March\u2019s downwardly revised 0.2% dip.<\/p>\n And the latest Housing Market Index survey from the\u00a0National Association of Home Builders<\/a> showed 38% of builders cut prices in July, up from 37% in June, 34% in May, and 29% in April.<\/p>\n Putting more downward pressure on prices is increased supply. Home listings have been climbing, as even homeowners with low, pre-pandemic mortgage rates eventually need to put those properties up for sale and buy new homes at higher rates.<\/p>\n \u201cGiven their demographic and job situations, locked-in homeowners must move,\u201d Zandi added. \u201cThey can only work around these needs for so long.\u201d<\/p>\n Conditions are so tepid that many homeowners who listed their properties are taking them off the market<\/a> after failing to find a buyer at the price they were offering.<\/p>\n Delistings are up 35% year to date and 47% year over year in May, outpacing active listing growth of\u00a028.4%\u00a0and\u00a031.5%, respectively, according to a Realtor.com report this month<\/a>.<\/p>\n For Zandi, that all adds up to bad news for the overall economy, which is already feeling strains from President Donald Trump\u2019s tariffs<\/a>. <\/p>\n \u201cHousing will thus soon be a full-blown headwind to broader economic growth, adding to the growing list of reasons to be worried about the economy\u2019s prospects later this year and early next,\u201d he said.<\/p>\n Analysts at Citi Research issued a similar warning<\/a> in May, when they pointed out that the economist\u00a0Ed Leamer,\u00a0who passed away in February<\/a>, famously published a paper in 2007 that said residential investment is the best leading indicator of an oncoming recession.<\/p>\n Citi pointed to fewer permits for single-family-home construction and an increase in the effective supply of homes on the market amid weak demand. Median home prices of existing homes were also falling on a monthly basis.<\/p>\n \u201cResidential fixed investment is the most interest rate sensitive sector in the economy and is now signaling that mortgage rates around 7% are too high to sustain an expansion,\u201d Citi said.<\/p>\n","protected":false},"excerpt":{"rendered":"The housing market is getting so weak that it\u2019s poised to become a significant drag on overall economic…\n","protected":false},"author":2,"featured_media":24862,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[28,21937,12189,2053],"class_list":{"0":"post-24861","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-home-builders","10":"tag-home-prices","11":"tag-housing"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/24861","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=24861"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/24861\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/24862"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=24861"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=24861"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=24861"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}