Expert: Housing Market Most Constricted Since 2006, Purchase Applications Down 40%

The United States housing market is just another sector of the economy that is suffering from coronavirus lockdowns and President Joe Biden’s policies. One expert predicts the most constricted housing market since 2006.

“The U.S. housing market is at the beginning stages of the most significant contraction in activity since 2006,” Len Kiefer, an economist with Freddie Mac, said in a Business Insider report.

Kiefer said this has not shown up in data yet but will surface over the summer.

“Purchase [applications are] down 40 percent from seasonally adjusted peak,” Kiefer said.

Insider reported:

[Kiefer] added that during the coronavirus pandemic, mortgage applications also dramatically fell, but they picked back up shortly after. That situation is unlikely in the current state of the U.S. economy.

It largely boils down to the Federal Reserve raising interest rates to tame soaring inflation. As consumer prices surge, the Fed has deployed more aggressive monetary policy, lifting the benchmark interest rate to 0.5 percentage points last month in its first double-sized rate hike and is set for a series of similar-sized increases this year.

That, in turn, has subsequently priced out potential homebuyers, as higher home prices and escalating mortgage rates reduce buyer affordability. And with the U.S. economy predicted to enter a recession in the next year, and inflation at a forty-year high, American homeownership is likely to get harder.

Insider reported that the National Association of Realtors has said housing affordability fell a record 29 percent over the last year, which is the largest decline on record. And mortgage rates and housing prices continue to rise.

Insider also reported that in the week leading up to June, the Mortgage Bankers Association said that applications for house purchase fell at a 52 percent annualized rate when compared to the previous three months.

“Consumers’ expectations that their personal financial situations will worsen over the next year reached an all-time high in [a] May survey,” Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a statement.

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