Housing market will continue to crumble this year, experts warn

Daily Mail​

5 days ago

The housing market is set to get even worse this year, experts have warned in the latest dire forecast. New research from Oxford Economics found that the already‑frozen market is barely holding steady — and conditions are expected to deteriorate further.
'The supply of existing homes for sale is approaching pre-pandemic levels as a combination of high prices, elevated mortgage rates, and concerns over the labor market keep buyers sidelined,' Oxford Economics analyst Mathew Martin said. 'The new-home market is also being challenged, with builders continuing to offer incentives including price cuts in an effort to move unsold inventory,' Martin wrote in the report titled 'Recession Monitor – Real test for economy is just beginning.'
Thirty‑year mortgage rates will average 6.7 percent across 2025 and end the year at around 6.4 percent. That is slightly higher than previous forecasts. Median home prices have jumped 52 percent since May 2019, far outpacing wage growth of just 30 percent, NAR data shows.
That would mark the lowest level since 1995, according to the National Association of Realtors. Buyers have been scared off by a rocky economy, surging HOA fees, and punishing mortgage and insurance rates, leaving sellers slashing prices to lure offers.
'A longstanding lack of inventory has supported both high prices and sluggish sales in the market for existing homes,' analysts Lawrence Werther and Brendan Stuart from Daiwa Capital Markets wrote in a report published earlier this week. 'Substantial improvement is unlikely to materialize in the near term until mortgage rates (and/or prices) ease, thereby mitigating the current affordability challenges faced by potential buyers,' they explained.
Lawrence Yun, chief economist for the National Association of Realtors, agreed, arguing that 'multiple years of undersupply are driving the record high home price. Home construction continues to lag population growth.' 'This is holding back first-time home buyers from entering the market.' Despite the frozen market, economists do not predict a correction in home prices but conversely see them rising 2.5 percent through 2025. This is largely driven by sellers who refuse to drop their asking price and are instead pulling their homes off the market in droves.
Others have been forced to slash their asking prices and accept a more reasonable offer in the current uncertain market. More than 20 percent of listed homes had price reductions in June, the highest share for the month since 2016. Phoenix, Arizona, is at the epicenter of the delistings trend, seeing more homes pulled from the market than any other area. Economists believe this is because areas in the South and West have seen inventory hit pre-pandemic levels but prices remaining flat or are even falling. Last week, Moody's Chief Economist Mark Zandi issued a 'red flare' warning for the housing market and cautioned that it could drag down the entire economy. 'I sent off a yellow flare on the housing market in a post a couple of weeks ago, but I now think a red flare is more appropriate,' Moody's Chief Economist Mark Zandi wrote on X.