More homes are languishing on the market without buyers, which will cause prices to start falling as soon as this summer, according to Brian Nick, senior investment strategist at the Macro Institute.
In fact, the annual percentage increase in the number of unsold existing homes for sale is the highest since the Great Financial Crisis, he said. Bloomberg TV on Thursday.
“This will put downward pressure on prices over the next three to six months,” he predicted.
For now, the housing market is still in the traditional spring selling season, when Americans typically buy homes while families try to purchase new homes before the start of the next school year.
By some accounts, the season is a disappointment as the growing supply of homes has been met with sluggish demand from buyers protesting high prices.
And as the summer selling season ends and moves into the fall, Nick said home prices will begin to fall and erode consumer confidence. While high prices have demoralized potential buyers, they have supported sentiment among homeowners along with a strong job market.
“Once they start to see house prices fall (perhaps the house next to them will cost a little less than asking, as opposed to what they’ve seen the last couple of years), it will impact their ability to spend and their willingness to spend ” too,” he warned. “The housing market is actually the first domino to fall on what we think will be slower growth going forward.”
Other housing market observers also point to a shift, with more buyers resisting the high home prices demanded by sellers.
Compass co-founder and CEO Robert Reffkin spoke about this. CNBC Last month, prices on 30% of market inventory fell more than at any time in the last decade, while supply rose 16%.
“It’s a different environment. We are now seeing more sellers than buyers,” he said.
But such weakness is still masked by national figures that show house prices are rising. The latest S&P CoreLogic Case-Shiller index showed prices rose 6.5% in March from a year earlier, hitting a new all-time high. Separate Redfin data showed they were up 7.3% in April compared to the previous year.
For his part, Nick from the Macro Institute noted that the number of existing homes for sale is now growing by 8-10% annually, suggesting that prices will soon come down.
“This supply-demand imbalance is starting to correct itself, which could mean you start to see lower prices as early as this summer,” he said.