Homes will not be more affordable unless 3 Things Happen: Mark Zandi

• Moody’s chief economic economist Mark Zandi claimed Friday that US existing home sales had reached a bottom. 
• He said that buyers have been kept out of the market by high mortgages and costly homes, but that US incomes also play a part.
• In the meantime, mortgage rates have fallen for six consecutive week, the longest drop in mortgage rates since 2008.

According to Mark Zandi (Moody’s Analytics’ chief economist), the average home price is now much higher than it was a year ago. To restore affordability and increase home-buying demand, three things must happen.

Zandi stated that affordability has been “completely hammered here” and that it’s the main issue. BloombergFriday “When you combine the high mortgage rates and the previously high house prices, it becomes too much.”

According to him, there are three things that the market must see to alleviate the affordability crisis. 

1. Lower mortgage rates

2. Lower house prices

3. rising incomes

Zandi anticipates that mortgage rates will eventually fall back to the range of 5%-5.5%, as the Fed has laid out a path to a 5% Federal funds rate target. Market expectations are now embedded in Zandi’s belief.

He said that the peak was likely indicated by the above-7% mortgage rates just months ago.

The average mortgage payment as of this week is $200 cheaper than it was several weeks agoThis has given homebuyers renewed buying power. The longest stretch of declines since 2008 is six consecutive weeks. 

Zandi stated that home prices would need to drop by 10% if US incomes continue rising and the economy does not enter recession. 

He stated that “that probably won’t occur until late ’24 or into ’25.” “So I believe we have a few years before affordability will get back to a point where, you know., demand will begin to rise again.”