December 9, 2022

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Jeremy Siegel, Paul Krugman on how bad the situation is

Jeremy Siegel, Paul Krugman on how bad the situation is

  • The US housing market is in disarray as rapid interest rate increases by the Federal Reserve drive up mortgage costs.
  • Home sales are down for 8 months and prices are down. But economists say the worst is yet to come.
  • Here’s what Jeremy Siegel, Paul Krugman, and five other top experts have to say about how painful things will get.

Alarm bells are already sounding for American homeowners, as rising mortgage rates scare off buyers — and the downturn in the US housing market will only get worse, experts say.

Signs of stress became glaring. Recent data showed that in September, existing home sales decreased 24% – The eighth consecutive monthly decline, marking the longest decline since 2007. Housing construction starts to fall backthe number New home listings down 22%.

Behind the housing market slump is the Federal Reserve, which has been aggressively raising interest rates to fight 40-year high inflation. he sent Mortgage rates are at a 20-year high.

This made buying a home more expensive, which paid Buyers to retreat – Mortgage applications are at their lowest level since 1997. Meanwhile, concerns about the upcoming economy are growing Recession Demand reduced.

Here’s what 7 top experts warn about what happens next.

Jeremy Siegel, Wharton Professor of Finance

Siegel told CNBC at recent interviewPointing out that housing prices by any indicator decline.

in Separate interview with CNBChe said, “I think we’re going to have the second biggest drop in home prices since the post-WWII period over the next 12 months. And that’s a very, very important factor in wealth. [and] for equity in the housing market.

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Mark Zandi, chief economist at Moody’s Analytics

“Keep in mind. Assuming rates stay near the current 6.5% and the economy weathers a recession, national home prices would drop about 10% from peak to trough,” He said in a recent tweet. “Most of these declines will happen sooner rather than later. Home prices would fall by 20% if there was a typical recession.”

in A recent housing report“The housing market is the most interest rate sensitive sector of the economy,” he said. “It is on the front lines of the fallout from the Fed’s efforts to bring down inflation.”

“There will be a coast-to-coast dip in the housing market. It will be brutal. No part of the market is immune.”

David Rosenberg, Veteran Economist and Rosenberg Research Leader

“We have a huge housing bubble right now. Most of the household balance sheet is residential real estate, which is equities,” Rosenberg said in an interview with RealVision released this week.

The economist noted the Fed’s aggressive efforts to bring inflation down from the recent rates of 8-9% to a target of 2%.

“They want the stock market to go down. They want housing prices to go down. Why? Because there’s no snowballing opportunity in hell, they would get to 2% consumer inflation, without there now being a period of asset deflation. It’s 100% necessary.”

Paul Krugman, Nobel Prize-winning economist

The veteran economist agrees that a sharp slowdown is coming – but he expects some prices to pass before higher prices really affect home prices and demand.

“The increase in interest rates by the Federal Reserve has already led to a sharp drop in applications for building permits. However, construction jobs have not yet started to fall, perhaps because many workers are still busy finishing homes that started when rates were lower. ,” He said in a recent comment.

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“The broader economic effects of the coming recession in the housing sector are still several months away,” he said.

Ian Shepherdson, Chief Economist at Pantheon Macroeconomics

Shepherdson believes that the sharp decline in home sales has not yet bottomed out, and even buyers who have set their sights on cheaper homes will still face larger mortgage payments.

“We expect a decline of 15-20% over the next year, in order to restore the pre-COVID price-to-income ratio,” He said in a note last week.

“In short, housing is in free fall. So far, most of the damage has been in sales volume, but now prices are also dropping, and they still have a long way to go.”

Don Peebles, real estate developer and CEO of Peebles

“I think the housing market is going into a recession. We’re going to see price drops — and the price drops have already started,” Peebles Fox News said last week.

“I look at this as if this freight train was out of control, speeding up, speeding up with low interest rates, and no one was looking to start slowing it down or slamming on the brakes. Now all of a sudden it’s coming in and hit the station.”

Chen Chao, head of economics research at real estate brokerage Redfin

“The housing market will get worse before it gets better,” Zhao He said last week, along with a report which found that 22% of homes for sale experienced a price drop in September.

“With inflation still rampant, the Federal Reserve will likely continue to raise interest rates. This means we may not see lower mortgage rates – a major killer of housing demand – until early to mid-2023.

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