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Housing correction is 'dead ahead,' warns economist Mark Zandi - YouTube
Channel: CNBC Television
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pending home sales breaking a six-month
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losing streak in may rising almost a
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percentage point last month versus april
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the northeast seeing the biggest gain up
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more than 15 percent but the overall
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figure still down 14 compared to the
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same time last year our next guest warns
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a housing correction is dead ahead mark
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zandi is the chief economist at moody's
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analytics mark great to have you with us
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thank you melissa um it's an important
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distinction you're calling for a
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correction and not a crash
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um what prevents us from from seeing a
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crash is that just that the underwriting
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this time around is a lot better a lot
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different
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yeah that's certainly part of it i think
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the unknown has been very good credit
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score is very high
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and that makes it much less likely we'll
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see defaults or as many as many defaults
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and you need those distressed sales to
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get a crash uh and also the market
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itself is very tight i mean the vacancy
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rate across the housing stock is at a
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record low or close too and that's in
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strong contrast uh prior to the the bus
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back a little over a decade ago when we
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were just rolling and uh too many homes
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so lots of big differences between now
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and then so not a crash but a correction
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if we see the 10-year yield sort of you
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know top out at least in the short term
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at three and a quarter percent market
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i'm not asking you to you know play
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forecaster but does that impact your
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your call for some sort of a correction
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well melissa i do that for a living you
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can you can do that all day long
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you can ask me for all kinds of
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forecasts uh well i mean you know we're
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at a 30-year fixed fixed-rate loan we're
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sitting around six percent you know
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that's a
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high and obviously a real problem for
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first-time home buyers and trade-up
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buyers because you know their monthly
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mortgage payment today
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they buy a typical home is much higher
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as several hundred dollars more a month
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higher than it was a year ago and so
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that that's that loss of affordability
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is behind the the correction i see
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if we stay around six i think the market
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will ultimately adjust and we get that
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correction uh you know if it goes much
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higher than that then we'll get you know
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a much more significant pullback in the
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housing market weaker home sales the
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weaker house prices and home buildings
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six percent we can we can digest it's
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not going to be comfortable but we can
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digest it that that's consistent with a
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correction mark i think it was wednesday
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the 14th of june jerome powell on his
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way out of that presser basically and
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i'm paraphrasing a little bit
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warned millennials you know now might
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not be the best time to be buying a home
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i mean it seems to me that the fed is
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doing everything they can to throw some
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serious cold water on what's been a
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pretty extraordinary housing market if
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they tell you that you've got to listen
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to them now
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yeah i i i didn't i missed that that's
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pretty interesting but yeah i mean of
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course the fed is working really hard to
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slow the economy's growth rate so we
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don't blow past full employment and
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exacerbate inflationary pressures
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and that's through higher rates and that
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means the most rate sensitive sector of
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the economy that's housing is going to
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feel the the first of that the first
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effects of that and we are already
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seeing that and we'll fill the brunt of
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it so this is to script at least so far
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exactly what the fed would want to see
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it's karen thanks for coming on mark g i
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have a question about we've seen big
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corporate interests in housing um you
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know the blackstones of the world buying
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houses and making them available for
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rent do you think they are done with
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that now that rates have moved up and
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maybe the market's sort of topped out on
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prices or do you think they're still
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there because the value proposition of
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high rents is here for a while
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i i think they're here to stay uh i
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think this is a business model uh you
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know that that works a longer run and
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there's a lot of capital sitting out
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there the these these institutional
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investors have raised a lot of uh funds
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that they're going to deploy now i
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suspect they're going to pause here i
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you know i don't think they're going to
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sell because they're long-term investors
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they may not buy in this environment
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then maybe they may wait to see you know
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how things shake out and probably make
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some sense right because i do expect
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house prices in many of these markets
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where they're most active in the south
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and the west to experience some price
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decline so you know i think it would
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make sense to for them to pause but i
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think these are our long-term products
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and by the way going back to
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melissa's first question that's another
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reason why there won't be a crash
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because you've got these investors in
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there that are you know long-term
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investors they're not they're not
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flippers they're not looking for a quick
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buck they're this is a business model
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mark thank you so much for joining us
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appreciate it sure any time mark sandy
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of moody's um it's in last week karen i
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you you bring up the point about these
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big investors being into single-family
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home starwood announced that it was
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looking to sell two portfolios of
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single-family homes which got me to
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thinking about this problem if if it
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does become a problem of these investors
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selling those homes and what that does
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to the market
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yeah right i mean they've been the
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ballast uh well maybe didn't need a
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ballast during the pandemic right there
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were tons of buyers everywhere and
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people were employed and you could work
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from anywhere all of that
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i i am concerned that that big corporate
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presence declines and that will
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tilt the you know supply demand dynamic
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and therefore price is more
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you
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