Housing market crash: Why 15-20% home-price declines 'very likely'

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A former IMF official says it's 'very likely' US home prices fall 15-20% as a credit crunch creates a lose-lose scenario for the housing sector and the debt ceiling standoff threatens a substantial recession

, a senior fellow at the American Enterprise Institute and a former deputy director at the International Monetary Fund, that's precipitating a sharp decline in home prices for two reasons.

On the other hand, a credit crunch puts the US economy at significant risk of a recession, Lachman said. In a recession, unemployment levels rise and spending falls. This is also bad for the demand side of the equation in the housing market. Lachman reiterated his call from 2022 that home prices will fall 15% to 20% peak-to-trough, and said such an outcome is"very likely" but that it would take time. According to the, home prices are already down 4.9% from their peak in June 2022 to February 2023. During the mid-2000s housing crisis, the index fell 27%. Home prices rose slightly from January to February, but it remains unclear whether it will be a sustainable bottom.

 

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