Yahoo Finance The housing slowdown is a top signal that the US is headed into a moderate recession, Fannie Mae says
A housing slowdown is a major indicator of a coming recession, Fannie Mae's chief economist said.
Existing home sales are on track to post further declines later this year, the mortgage giant estimated.
But the strength of the sector could also help pull the US out of a recession in 2024.
The housing market is signaling that the US is headed into a moderate, Fannie Mae's chief economist Doug Duncan warned.
The government-sponsored mortgage agency predicted a modest recession to hit the economy later this year, pointing especially to the slowdown in US housing activity. Existing home sales have plunged to their lowest level since 2010, and are on track to post more declines later this year, per Fannie Mae's estimates.
A decline in sales is particularly expected in multifamily real estate, as credit conditions are expected to tighten this year.
"There are select data available to support several alternative views of the path of the economy, though we maintain our view that a modest recession will begin in the second half of 2023," Duncan said in a statement on Friday. "Housing remains exhibit number one for why we expect the recession to be modest."
Economists have been warning of a possible recession over the last year, largely due to rising interest rates and tighter credit conditions in the economy. Central bankers have raised interest rates 500 basis points in a year to tame inflation, a move that risks pushing the economy into a downturn. It's also influenced mortgage rates to trend higher, and has pushed the 30-year mortgage to 20-year highs. This has has weighed on the housing market as high borrowing costs push both buyers and sellers to the sidelines.
Still, Duncan noted that housing sector has outperformed expectations, given rising interest rates and high inflation. A relatively strong housing market could help the economy exit a recession as soon as 2024, he added.
But housing activity overall is unlikely to pick up soon, other industry experts have warned. That's because affordability will be pressured until mortgage rates begin to drop, and rates are expected to remain near a 20-year-high through the next year, Bankrate analyst Jeff Ostrowski told Insider.
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