Skip to content

  • Moody’s chief economist Mark Zandi said Friday that US home sales have bottomed out.
  • A combination of high mortgages and expensive homes has kept buyers out of the market, but U.S. incomes are also playing a role, he said.
  • Meanwhile, mortgage rates have fallen for six straight weeks, the longest decline since 2008.

According to Mark Zandi, chief economist at Moody’s Analytics, typical home prices are now much higher than they were a year ago, and three things need to come together to restore affordability and boost homebuying demand.

“Affordability is completely undermined here, and that’s the fundamental problem,” Zandi told Bloomberg on Friday. “You mix high mortgage rates with historically high housing prices, it’s just too much to take.”

According to him, the market needs to see three things to alleviate the affordability crisis.

1. Low mortgage rates

2. reduction of housing prices

3. revenue growth

Zandi expects mortgage rates to eventually return to the 5%-5.5% range as the Fed has set a path for a 5% Federal Funds rate that is now embedded in market expectations.

Mortgage rates above 7% just months ago probably signaled a peak, he noted.

As of this week, the average mortgage payment is $200 cheaper than it was a few weeks ago, giving homebuyers new purchasing power. Mortgage rates have now fallen for six straight weeks, the longest streak of declines since 2008.

However, if U.S. incomes continue to rise and the economy avoids recession, home prices would need to see a roughly 10% decline to be affordable, Zandi said.

“It probably won’t happen until the end of the 24th into the 25th,” he said. “So I think we’ve got a couple of years here until affordability gets to a place where, you know, demand starts to improve again.”


Leave a Reply

Your email address will not be published. Required fields are marked *