Recession could lead to decline in home prices: Redfin chief economist

Redfin chief economist Daryl Fairweather argued that a recession could coincide with falling house prices as prices continue to climb even though data shows sales have slowed.

Fairweather provided the information shortly after the National Association of Realtors (NAR) said existing home sales in the United States had slowed for the fourth straight month amid rising mortgage rates and record prices.

Sales of existing homes fell 3.4% in May from the previous month to a seasonally adjusted annual rate of 5.41 million, according to the association, which noted that sales fell 8, 6% compared to the same period last year.

Even as home sales slowed, prices continued to climb last month, according to NAR, which noted that the national median home price jumped 14.8% in May from a year earlier to reach $407,600, an all-time high based on data going back 23 years.

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Speaking on “Varney & Co.” On Tuesday, Fairweather pointed out that home prices could plummet if “the economy is so badly hit” that buyers can’t afford what’s available.

The National Association of Realtors said sales of existing homes in the United States slowed for the fourth straight month as rising mortgage rates and record prices dampened demand. (iStock/iStock)

“I think of everything in the economy, the housing market is still in a pretty solid space because of how well-financed people were coming into this inflation and they had a lot of equity,” Fairweather said.

“We’re not going to see any distressed sales, but we could see a drop in prices if the economy is so badly hit that buyers just can’t afford the high prices that sellers want.”

Fairweather also noted that “buyers are pulling out of the housing market” with higher interest rates.

“They just can’t afford the same budget as last year,” she said, pointing out that “the median monthly mortgage payment is up almost 50% from last year.”

“So buyers either have to squeeze their budgets or give up,” she continued.

Fairweather also noted that sellers also don’t want to lower their price and are “just going to sit back”, especially since “they have a lot of equity in their property” and “record mortgage rates since Last year”.

“So we’re going to have fewer listings, fewer buyers and that will just mean a lot less sales, but the high prices will persist,” she said.

Fairweather pointed out that “people just don’t feel as motivated to buy a home right now” given high mortgage rates and inflation.

“And it’s not like you can get a repairman and expect to get a deal because … the price of fixing a house is also going up,” she added.

Earlier this month it was revealed that inflation remained painfully high in May, with consumer prices hitting a new four-decade high, exacerbating financial stress for millions of Americans.

The Labor Department said the Consumer Price Index, a broad measure of the price of everyday goods, including gas, groceries and rents, rose 8.6% in May. compared to a year ago. Prices jumped 1% in the month-long period from April. Those figures were both higher than the headline figure of 8.3% and the monthly gain of 0.7% predicted by economists at Refinitiv.

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Shelter costs – which account for about a third of the CPI – accelerated in May, climbing 0.6%. This is the fastest monthly increase since 2004. On an annual basis, housing costs rose 5.5%, the fastest since February 1991.

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