Home sales can’t get much worse than they already are, write Chen Zhao and Daryl Fairweather in a guest commentary.
About the authors: Chen Zhao leads the economics team at Redfin. Previously, she was an executive director leading housing finance and financial markets research at the JPMorgan Chase Institute. Daryl Fairweather is the chief economist of Redfin. Previously, she was a senior economist at Amazon and housing researcher at the Boston Fed.
Ten-year Treasury bond yields briefly broke above 5% in October, while 30-year mortgage rates have hovered around the 8% mark. Consumers will soon grapple with the harsh sting of elevated interest rates, impacting their credit card bills, auto loans, and medical debt. Businesses built on the premise of abundant and cheap capital may suddenly find themselves at the end of their financial runway.
We might see a modest increase in distressed sales, particularly among homeowners who were enticed by teaser rates in 2022, set to expire in 2024. This could result in a slight uptick in new listings, leading to a marginal decline in home prices. However, cash buyers are eager for discounted properties.
Ironically, if the economy does fracture and financial markets face turmoil, the housing market would see relief. If the economy contracts, the Federal Reserve would likely move swiftly to lower interest rates. That would render homebuying more affordable, echoing the patterns observed during the pandemic recession and the 2001 recession. Housing demand could grow, even as the broader economy falters.
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