Over the past week, a growing chorus of public figures — from Elon Musk and Ross Perot Jr. to Barbara Corcoran and Dave Burt — have stepped up their rhetoric around an impending “housing recession.”
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A growing chorus of influential and wealthy public figures has heightened fears of a looming housing crisis as a vote to suspend the debt ceiling moved to the Senate on Thursday in a race to end a possible default on the government.
In the past week alone, public comments from real estate billionaire Ross Perot Jr, Corcoran Group founder Barbara Corcoran, Twitter owner Elon Musk and big short Investor Dave Burt has warned of an impending “housing recession”, “bloodbath” and “collapse”, citing various causes for the downturn.
“It’s fine to say pennies on the dollar, but no one has the confidence to buy now,” Corcoran said Wednesday in an interview on Fox Business, referring to the trading sector. “No one really believes it’s going to turn the corner. I don’t see it running. I think it’s going to be a bit of a bloodbath before it gets better.
Corcoran, star of the popular entrepreneurial game show shark tank, noted, however, that it expects the housing sector to rise again as soon as mortgage rates, which earlier this week hit a 2023 high of 6.91%, sagged.
A recent analysis by Zillow concludes that mortgage rates could rise to 8.4% in the unlikely event that the US defaults, which would increase monthly payments by 22% for borrowers who take out mortgages in the future.
“Right now what everyone is afraid of is high interest rates,” Corcoran added during his interview on “The Claman Countdown.” “But the minute those interest rates go down, everything is going to break loose and prices are going to skyrocket,” Corocran said. “House prices, I wouldn’t put it based on the housing market that prices are going up 20%. We could have COVID again.
In addition to Corcoran sounding the alarm, a common thread among the flurry of recent warnings was the dire state of the commercial real estate sector, with office valuations threatening to plunge by as much as 40%, because higher interest rates make it harder for investors to refinance. billions of dollars of impending debt.
Perot Jr, son of former independent presidential candidate Ross Perot and chairman of the Perot Group, warned in a Bloomberg TV interview on Tuesday that a “housing recession” could be imminent if banks don’t start lending again.
“If industry can’t get construction loans, real estate will go into a recession,” Perot said. “The key to commercial real estate today will be banking.”
Perot said in the interview that it has become so difficult for builders to get construction loans that his development company, Hillwood, is helping finance other developers.
Musk, however, in comments made on the social media website he bought last year, offered a different theory, predicting that home valuations would follow lower office prices.
“Commercial real estate is collapsing rapidly. Home values next,” tweeted the billionaire, who claims to have sold all of his homes while sleeping on friends’ couches.
Musk’s comments were quickly met with rebuttals from residential real estate leaders, including Redfin CEO Glenn Kelman, who pointed out that residential real estate does not suffer from the same lack of demand as the commercial real estate since the beginning of the remoteness. work.
“The loss of demand for commercial real estate is what is driving demand for residential real estate,” Kelman wrote. “People who work from home need more space at home. Sales volume is down because inventory is down. Today, house prices rose for a second consecutive month.
Indeed, data released this week via the S&P CoreLogic Case-Shiller Index shows U.S. home prices rose 0.7% in March from a year earlier — the second month in a row that prices have risen, leading many experts to suggest that a period of annual price declines may be coming to an end.
Sales of existing homes, however, fell 3.4% in April to an annual pace of 4.28 million, as the stock of homes for sale hit 1.04 million units, a gain of 7, 2% compared to March.