Pantheon Macroeconomics founder and chief economist Ian Shepherdson described the impending future of the U.S. housing market as a “meltdown” in a note Monday.
“Pretty soon, anyone who has bought a home in recent months will be sitting on a loss,” Shepherdson wrote in an email, according to Forbes. As home prices start to drop significantly, the COVID-19 home purchase surge will soon be quelled, the New York Post noted.
Compounding the issue, home builder confidence plummeted 12 points to 55, the National Association of Home Builders (NAHB) and Well Fargo Market Index reported. Home builder sentiment is the lowest it’s been since the first months of the COVID-19 pandemic, according to Reuters.
Confidence in the housing market has been pushed down further by extreme inflation and interest rates, the NAHB noted. Mortgage applications dropped 1.7% in the first week of July and the average purchase loan size fell by $45,000, according to MarketWatch.
“This was an accident waiting to happen,” Shepherdson continued, according to MarketWatch. “Homebuilders have been in denial about the extent of the drop in demand, despite mortgage applications falling by more than a quarter over the first half of the year, with no end in sight to the decline.”