Severe US housing downturn ‘possible,’ prices could fall 15%: Fitch

The probability of a “severe downturn” in the US housing market is on the rise, according to new guidance from credit reporting agency Fitch.

Fitch’s likely projections suggest that US home prices could sink by 10% to 15% in the case of a major housing slump, alongside a roughly 30% decline or more in housing activity over the next few years.

“The likelihood of a severe downturn in US housing has increased; however, our rating case scenario provides for a more moderate pullback that includes a mid-single-digit decline in housing activity in 2023, and further pressure in 2024,” Fitch analysts said in a release on Tuesday.

The agency noted a severe downtown was “possible, but not yet probable,” with a minor slowdown still the most likely outcome for the housing market. Fitch said it recently affirmed a “stable outlook” for US homebuilders.

Fitch pointed to several factors as “key indicators” for the health of the housing market, including US GDP growth, unemployment, consumer confidence and home affordability.

The firm warned it could “lower our rating case projections if trends weaken beyond our expectations.”

Additionally, Fitch said its “stress case” for the housing market in the event of a sharp economic downturn suggested that homebuilder deliveries would sink by about 20% in 2023 and 10% in 2024. In that case, average sale prices of US homes could “fall to mid-to-high single digit percentages annually.”... (Read more)

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