As interest rates soar ever-higher and market economists eye a possible recession in the not-so-distant future, the housing market is bracing for big changes, but just how big will they actually be? According to MarketWatch, mortgage applications are down 28% from peak highs, new home sales have fallen 17%, and housing starts recently dropped by 13%. As the market continues to slow down from a mid-pandemic homebuying frenzy, prices are expected to fall not just in the U.S., but also in a number of nations recovering from economic turmoil.
Canada and New Zealand are expected to see prices fall by roughly 20%, while Australia and Sweden could see housing prices drop by upwards of 15%. On a smaller scale, the U.K. could see modest drops of 5% to 10%, and the U.S. will likely experience only a 5% decline nationwide.
Capital Economics has previously outlined the four stages of housing downturns — 1) Weakness of housing market sentiment 2) Measures of buyer traffic fall back 3) Measures of housing market activity start to drop, and 4) House prices themselves fall.
[Neil] Shearing said the U.S., U.K. Canada, Australia, New Zealand and Sweden are in stage 3 of that process. And compared with the mid-2000s, this one is “happening more quickly, with most indicators showing sharper initial falls,” he said.
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