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A potential US housing recession would lead to a 15 percent drop in prices

US housing recession would lead to a 15 percent drop
US housing recession would lead to a 15 percent drop
Khushbu Kumari

New projections suggest that if the housing market in the United States cools down further, it could lead to a drop in its prices of up to 15%.

Forecasts of a possible recession in the real estate sector are becoming stronger. Projections indicate that the cooling in the market could lead to prices falling by up to 15%.

In a statement , the credit reporting agency Fitch said that in the event of a decrease of approximately 30% or more in real estate activity in the coming years, prices would plummet between 10% and 15%.

“The probability of a severe recession in US housing has increased; however, our rating case scenario sees a more moderate pullback including a mid-single-digit decline in real estate activity in 2023 and further pressure in 2024,” analysts at the agency said.

Ficht said that in the event of a deep economic recession in the country, deliveries from homebuilders would be reduced by about 20% in 2023 and 10% by 2024. Average US home prices would fall “by percentages of a only mid to high digit annually.”

Builders that don't build up enough cash reserves in a downturn will likely need to issue debt to rebuild inventory positions in a housing recovery , stretching credit metrics.

The agency said that factors such as the growth of the Gross Domestic Product (GDP) in the country, unemployment, consumer confidence and housing affordability will be "key indicators" to determine the health of the housing market in the short term.

Fitch's report on a recession is in line with that recently issued by the National Association of Home Builders (NAHB) and Wells Fargo on homebuilder sentiment , which came in at 49 points out of 100 and marks the eighth straight decline. amid soaring home prices , unstable mortgage rates, and buyers pulling out due to poor home affordability.

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