Economist David Rosenberg sees parallels between current US housing market trends and the lead-up to the 2008 crash, specifically citing a worrying drop in the annual rate of home sales.
Falling home prices and sales activity could signal broader economic weakness, impacting consumer spending through the wealth effect and potentially mirroring conditions that led to the 2008 housing crisis.
Veteran economist David Rosenberg has identified a concerning trend in the U.S. housing market, drawing parallels to the period preceding the 2008 financial crisis. Rosenberg, known for accurately predicting past market downturns, is closely watching the falling annual rate of home sales as a key indicator.
According to data from the National Association of Realtors, the annualized pace of existing home sales dropped by nearly 2% to 4.06 million in July. This figure is notably lower than the 4.89 million sales recorded in January 2008, a time when the housing collapse was beginning to unfold. Rosenberg highlighted that this slowdown in transactions is occurring as mortgage rates have increased, and a 'lock-in effect' from low pandemic-era rates is discouraging sellers from listing their properties.
The market currently faces a supply overhang, with approximately 4.6 months of unsold housing inventory. Rosenberg estimates that a similar pressure on demand and supply in the past led to a roughly 2% drop in median home prices. He expressed concern that while inflation is a primary focus, real estate prices are showing signs of weakening.
Rosenberg further warned that a decline in home prices could trigger broader economic weakness through the wealth effect. As homeowners see the value of their properties diminish, they may reduce their spending, counteracting any positive effects from the stock market. Despite these concerns, the median sale price for an existing home still saw a 2% year-over-year increase in July, though specific market segments are experiencing price declines due to slumping demand and rising inventory.