According to a report from Fitch, the likelihood of a severe housing collapse has increased, and in such case, US home prices might decline by as much as 15%.

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However, the credit rating agency stated that a slight slowdown is still the more likely scenario, forecasting a decline in housing activity of low to mid single digits in 2024.

 

Although Fitch reiterated its stable forecast for US homebuilders, it predicted that a significant market downturn could cause housing activity to decline by 30% or more over several years, with home values falling by 10% to 15%.

Consumer confidence, GDP expansion, home prices, and unemployment were named by Fitch as major determinants of its estimates.

 housing
housing

According to Fitch’s “stress case,” which assumes that the housing market weakens more and the economy continues to contract, homebuilder deliveries will decline by about 20% in 2023 and 10% in 2024. Homebuilders would “certainly need to issue debt to develop inventory positions in a housing recovery, which would exceed credit metrics,” the research stated.

As purchasers
As purchasers

 

As purchasers are deterred from taking the plunge and buying a new home by rising inflation and interest rates, US home prices have already been falling slowly during the summer months.

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