Ian Shepherdson of Pantheon Macroeconomics, predicts that sales may start to fall significantly. According to his research note, existing-home sales are likely to decrease by roughly 25% from their February annual rate of 6.02 million to 4.5 million by summer’s end.
Since most buyers rely on loans to make a large purchase, a drop in mortgage demand could predict a slowdown in home sales. Low affordability is probably to blame, so let’s consider these five reasons to fear a fall in housing market prices.
As a result of low liquidity, banks cut back on lending during the 2009 recession. Homeowners wanted low-interest-rate mortgages, but banks kept tightening lending criteria, making it harder to get a mortgage.
Bidding wars are common during this time. In contrast, a buyer’s market occurs when the housing market is weak but the supply is plentiful. Oversupply often results in declining property prices and homes sitting on the market longer than sellers would like.