Source: MacroHive —
Summary
- The US housing market is poised for a tough couple of years.
- A mix of challenging supply/demand dynamics, combined with stretched affordability and deteriorating sentiment, will weigh on the market.
Introduction
US housing is one of the most important markets in the world – you only need look at the central role it played as a catalyst for the 2007-08 global financial crisis (GFC) for evidence.
Looking ahead, the market’s performance this year could materially impact not only the US economy but the world. The US economy is broadly expected to outperform other regions this year. But if the American housing market falters, it could help tip the US into recession, deepening the global economic slowdown.
Worryingly, renowned US housing market expert Ivy Zelman expects America to experience a housing crisis. In a discussion with Macro Hive’s Bilal Hafeez first published July last year (the most listened-to Macro Hive podcast in 2022), Zelman laid out the argument for her pessimism towards US housing.
For 2023 and 2024, Zelman sees US house prices falling 4% and 5%, respectively. The speed of the deterioration in fundamentals, however, means Zelman thinks these negative forecasts could be conservative.
Inventory and Velocity
The key to understanding inventories is to consider the notion of what Zelman calls ‘velocity’ – the quickness of the turnover in housing stock.
