A Housing Correction may be on the Horizon, not a Housing Market Collapse
Revised from Bloomberg's Vince DiMiceli
According to a top Moody’s Economist, mortgage rates throughout Arizona, the Carolinas, Florida, and Idaho will continue to rise and housing prices will lower. However, with full confidence, Mark Zandi, the economist in question, says there will be no crashing in the housing market.
At the Housing Policy Summit in Washington D.C. yesterday, Mark Zandi explained why a lack of mortgage defaults and distressed sales would secure prices from dropping to ultimate lows. He said, “That’s when you get crashes when you have lots of foreclosures and a lot of distressed sales. That’s just not going to happen.”
Vacancy rates also reached historic highs before the last financial crisis in 2007-2008. Currently, these rates are at an all-time low and the quality of mortgage underwriting is very high. The majority of the loans are simply “plain vanilla,” which is why there are no current signs of subprime or negative amortization.
The preponderance of speculation and flipping is very low nationwide compared to other housing market collapses, Mark Zandi added.
Just last year, the housing inventory during the lockdowns sent home prices skyrocketing as mortgage rates dropped. This trend, according to the Fed and other sources, should slow down. Especially since mortgage rates are slowly creeping back to 6%. The 30-year mortgage rate ended the week at 5.81% which is up 3.02% when compared to the same week just one year ago, according to Freddie Mac.
Adding to the names mentioning a housing crisis, according to Jacob Channel of Lending Tree, rising interest rates have already caused a slight market stoppage. He said, “Fewer people are getting mortgages, homes are sitting on the market for longer and some sellers are cutting prices.” However, Jacob Channel did note that prices have yet to be affected. In May, the median existing-home sales price was $407,600 which is up nearly 15% from the same time period last year, according to the National Association of Realtors.