The US housing market is grappling with a recession, and home prices could dip another 20% by next summer, a top economist has cautioned.
“The plunging trend in sales has further to go, and prices are falling,” Ian Shepherdson, the chief economist of Pantheon Macroeconomics, said in a research note published on Wednesday.
Shepherdson and his team estimated that seasonally adjusted existing-home prices slid by 0.7% in August, the third monthly plunge in a row. Prices are now down about 5% from their May high and are poised to tumble further despite a tight supply of homes, they said.
“The very low level of inventory means that a headlong collapse in prices is unlikely, but we still expect a total decline of up to 20% by the middle of next year,” the economists wrote.
“Housing, in short, is in recession, and everything connected to housing either is in recession now or soon will be,” they added.
Nonethelss, they explained that the current housing downturn won’t crash the rest of the US economy, as the market has fewer entrenched risks than during the mid-2000s housing bubble.