Economist Warn Home Prices Won’t Fall Without Mass Unemployment

The housing market is sending mixed signals lately.

Mortgage rates have dropped to their lowest point since May 2023, with new 30-year fixed-rate mortgages hovering around 6.5%.

This decline comes as the market anticipates the Federal Reserve will lower interest rates soon.

You might think this would spark at least some modest amount of excitement among home buyers, but that’s not what we’re seeing.

David Doyle and Chinara Azizova, economists at Macquarie, paint a different picture.

They describe the current buying conditions as “extremely stretched” when it comes to down payments and overall affordability.

RELATED: Here’s How Kamala Harris’ Plan to Tax Unrealized Capital Gains Will Crash the US Economy

The Macquarie team doesn’t see home prices falling significantly unless there’s a major shake-up in the job market.

As they put it, “there is unlikely to be a meaningful decline in prices without significant job losses.”

They point to a long-standing issue as the root cause of our housing woes: we simply haven’t been building enough homes for the past 15 years.

But don’t expect prices to shoot up either.

The economists argue that “Sizeable price gains are also unlikely given stretched affordability.”

Lower mortgage rates might give the market a boost, but an increase in available homes could partly offset any price jumps.

The job market is also sending some worrying signals. July saw the unemployment rate climb to 4.3%, the highest it’s been in three years.

This uptick even triggered something called the “Sahm rule,” a recession indicator that’s got investors on edge.

All eyes will be on the August jobs report, due out in early September.

This report could give us clues about when the Fed might make its first rate cut in four years, and by how much.

In this uncertain environment, potential home buyers and investors alike are left watching and waiting.

READ NEXT: California Set to Give Illegals Up to $150,000 Down Payment Assistance to Buy a House

The housing market seems to be at a crossroads, with lower mortgage rates pulling in one direction and affordability issues pushing back.