The U.S. is seeing it’s second biggest home price correction of the post-WWII era with 55% of Americans saying they cannot afford to buy their home in today’s market, according to the CATO Institute 2022 Housing Affordability National Survey.
Mitch Roschelle, Macro Trends Advisors founding partner, told Fox News he attributes the huge correction to American’s uneasiness regarding the markets and the economy. He said that the “shoe to drop” would be seeing a rise in unemployment that may cause a “leg down” in the real estate market.
“A couple of things are going to cause it to turn in the opposite direction, meaning home prices are going up. One is certainty. And when you don’t know if interest rates are going to go up or not. I think that is what is driving a lot of people away from buying because they just don’t know if rates are going to be cheaper in two months, and they’re just going to wait,” said Roschelle.
He went on to say, “And the other thing is uneasiness regarding the economy. And I think the shoe to drop there would be if we start seeing layoffs, and we start seeing unemployment starting to rise, I think that could be something that causes a leg down in the housing market in a big way.”
Roschelle’s comments follow a power shift currently happening in the U.S. housing market away from sellers.
“Right now, I would say it’s a buyer’s market. I think the power has completely shifted from seller to buyer. Doesn’t mean you don’t see some bidding wars because again, I think statistically across the country, we’re at 3.3 months supply. So that’s still relatively low. So, if there’s a house that hits the market that’s perfect, and it ticks all the boxes for buyers and there are buyers out in the market, I think you could see sporadically bidding wars, but mostly, you know, it’s one or two people chasing that house. And we’re not seeing that. We’re not,” Roschelle said.
The average home price is expected to plummet from its peak at the height of the pandemic. According to Fortune.com the price of homes in the country in October 2022 were 38.1% above March 2020 levels. Roschelle believes that the average price will drop by at least 10% from its peak in 2022.
“My 10% to 15% [prediction] is from the peak in 2022, that is where we land in terms of average home prices being down 10 to 15%. Which if we’re talking about the stock market, it would certainly be seen as a correction, but not a bear market. The thing to remember is that from February 2020, home prices went up as much as 40% to where we are today,” Roschelle explained.
You can view the CATO Institute 2022 Housing Affordability National Survey here.