Several indicators point towards a significant housing market correction, said Eric Basmajian, Founder and Editor of EPB Macro Research. As the Fed raises rates and incomes decline, consumers will struggle to make mortgage payments.
“In the leadup to 2008, the debt buildup was very concentrated in the banking sector and the housing sector in the form of mortgages,” he explained. “There is much less of a debt buildup in [those sectors today], which would indicate that there is significantly less chance of a banking crisis.” The months’ supply of new homes, another leading indicator for housing markets, is 10.9 in July. Basmajian said, “a balanced market is about 5, and we’re at about 11.”