Notions of an impending housing market crash are eating up Wall Street ahead of next week’s crucial Case-Shiller U.S. Home Price Index report, due Sept. 26. With housing affordability at its worst level in decades and recession fears hitting a fever pitch, some believe home prices are destined to tumble.
What should you expect in the July Case-Shiller report?
Well, according to most housing economists, home prices are liable to continue increasing in July. Indeed, despite mortgage rates peering over 7% — resulting in a drastic decrease in housing demand — home prices seemingly just continue to rise.
If you recall, home prices rose 0.7% month-over month in June, the fifth consecutive increase in home prices per the Case-Shiller. The 20-city index also increased in June by 0.9%, beating estimates of a 0.8% increase.
Housing Market Crash Fears Elevated Ahead of Case-Shiller Report
Housing market experts currently hold a relatively optimistic view of the housing market heading into the tail-end of 2023. Even as recession concerns continue to swirl around Wall Street, most economists believe last month’s report offers strong evidence that housing won’t experience deep recession, if it ends up receding at all.
“We recognize that the market’s gains could be truncated by increases in mortgage rates or by general economic weakness, but the breadth and strength of this month’s report are consistent with an optimistic view of future results,” said Craig Lazzara, Managing Director at S&P Dow Jones Indices.
With the Federal Reserve continuing to hint that interest rates will remain elevated for the foreseeable future, many have assumed that consequently high mortgage rates will eventually result in lower home prices. Unfortunately, though, the limited supply of available homes for sale in the U.S. means even dramatic decreases in demand are unlikely to move prices very much.
And to be clear, housing demand is suffering. Mortgage applications and home sales have been on a downward slide this year, with little reaction from home prices.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.