Yahoo Finance
Jeremy Siegel, a professor at Wharton, predicts that the housing market will see negative growth as a result of future Federal Reserve interest rate increases that will raise mortgage rates even further.
Due to the average rate for a 30-year fixed mortgage more than doubling this year, the housing industry has seen a slowdown in sales. The average 30-year mortgage rate this week was 6.81%, according to data from Freddie Mac, which was near its highest level since 2002.
“I expect housing prices fall 10% to 15%, and the housing prices are accelerating on the downside,” Siegel recently told CNBC.
With such a drop, the median sales price of a single-family home in the US would drop from its second-quarter record high of $440,000 to just under $375,000 — ouch.
If you just purchased a home, you can hedge some downside connected to a housing correction by investing as little as $100 in rental properties to earn passive income and build wealth over the long term.
In reaction to the declining property prices, Siegel said he is more concerned that the Fed will do nothing.
This is because the Fed will move too late as it attempts to control inflation by raising interest rates because of its concentration on trailing data.
According to Siegel, the housing industry is the biggest offender for the government’s poor monitoring of inflation.
“Let’s go to the housing sector, up .7%,” Siegel said, in reference to September’s CPI report that showed inflation is still above expectations. “I am not at all surprised by the number because the number is ridiculous. It has no meaning to what the actual rate of inflation is. Housing, which is almost 50% of the core rate, is the most distorted of all.”
New inflation data from October shows Shelter climbing 0.8% after climbing 0.7% in September.