US home prices are about to tumble

Demand for new houses ‘craters’

US home prices are already falling and are about to drop even more sharply as demand for new houses “craters”, according to an economist at the consultancy Pantheon Macroeconomics.

“Single-family homes are about 15% to 20% overvalued, so the next few months will be very tough,” Ian Shepherdson, chief economist at Pantheon Macro, said in a note to clients Tuesday. Data on US new home sales for June is due out Tuesday. Economists polled by Bloomberg expect sales to have fallen to 659,000, from 696,000 in May.

However, Shepherdson said he is expecting a much bigger drop to 550,000. New home sales topped 1 million in August 2020. “The trend in new home sales closely follows the mortgage application numbers, which make it clear that demand is cratering,” he said.

The ongoing fall in sales is driving up the availability of housing relative to the number of buyers, meaning prices are likely to fall sharply, Shepherdson said. Pantheon Macro estimated that single-family existing home prices dropped by a “hefty” 1.8% in June compared to a month earlier, following a 0.4% fall in May.

Comments are closed.