Famed economist David Rosenberg says home prices are set to fall further as buyers retreat to the sidelines and a hawkish Fed means stubbornly high mortgage rates
With mortgage rates unlikely to budge and incomes unlikely to grow, prices are due to drop.It's aThe data tells this story: existing home sales are down 23% from last year, and have posted monthly declines 14 out of the last 15 months, economistWith housing affordability near its worst levels in decades, Rosenberg — the founder of Rosenberg Research and the former chief North American economist at Bank of America Merrill Lynch — said home prices are set to drop further.
Housing affordability is calculated by accounting for three variables: home prices, mortgage rates, and incomes. With the latter two variables unlikely to shift materially in the near future, Rosenberg said home prices are what will have to budge. "Homeowner affordability is more than 30% worse than the norm for the past quarter, which means that outside of the income boom , massive rate declines , then all that is left to mean revert this series is home price deflation ," he said in the note. He added:"I mean — look at the typical monthly payment for a first time buyer, at $1,825 that is +33% higher than it was this time last year.
But Rosenberg attributed the rise to seasonality, and when adjusted for this, the market's weak trend still showed. "While median sales prices did rise +3.6% in April, this was actually pretty weak for the spring season. Seasonally-adjusted, resale home prices flattened in the February-April period and have swung to -1.7% on a YoY basis from +14.3% at this very same time in 2022," he said."Not since January 2012 have we seen the 12-month trend in real-estate prices this negative."
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