US home price plunge is ‘just beginning’ as housing market rapidly cools: economist

A substantial plunge in US home prices is likely “just beginning” as decades-high mortgage ౠrates cause a downturn in the housing market, a prominent economist cautioned Friday.

The warning from Pant🐭heon Macroeconomics chief economist Ian Shepherdson followed more dismal data that showed a slowdown in housing activity.

Pending home sales — a measure based on signed contracts — plunged 10.2% in September, according to the National Association of Realtors.

The pending home sales index has plummeted 31% to 79.5 compared t🐬o one year ago.

But cratering demand has only recently started to result in lower home prices — meaning more financial pain is on the way for prospective sellers.

“The bad🎶 news is that prices have much further to fall before the market adjusts fully to the collapse in demand,” Shepherdson said in a note to clients🎃.

“Home prices have only recently started to decline on a month♛-to-month basis,” Shepherdson added. “The resilience in prices was made possible by a lack of existing homes on the market, but supply is now rising — albeit slowly — as homeowners who previously held off on selling worry that further delays will mean they fetch a much lower price.”

As The Post reported, Shepherdson recently warned he expects home prices to fall by 20% by next year — a substantial correction after values hit record highs during the pandemic-era housing boom.

Mortgage rates topped 7% this week for the first time since 2002, according to Freddie Mac. Long-term rate🐲s have spiked as the Federal Reserve hikes interest rates to combat in💝flation.

“The good news is that mortgage rates likely are close to a peak, and if they remain around their current leඣvel, sales will find ⛄a floor early next year,” Shepherdson added.

Sellers are slashing their asking prices to entice buyers who are facing th🦩e worst affordability crunch in decades. Mortgage payments are commandin♈g a much larger share of household income, and while home prices are falling fast, they’re still higher than they were one year ago.

NAR chief economist Lawrence Yun wa⛎rned that 7% mortgage rates ♛are the “new normal” for buyers until the economy begins to improve.

“Only when ꦑinflation is tamed will mortgage rates retreat♉ and boost home purchasing power for buyers,” Yun said.