Neil Shearing, chief economist at Capital Economics, says in a note that the housing market is due for a correction but don’t expect a 2008 price level drop…(MarketWatch)
- Shearing writes, “And there are growing signs that this rise in borrowing costs — and the anticipation of further increases to come — is already fueling sharp downturns in housing markets across advanced economies,”
NOT 2008: However, unlike the loose credit standards and lack of equity that fueled the mid-aughts boom. Today’s boom is “underpinned by the extremely low level of nominal (and real) interest rates,”
DOUBLE-DIGIT DROP: Shearing believes the US housing market could see a 5% drop while other markets could be in for a much bigger drop. Shearing sees a big 20% correction in Canada and New Zealand, followed by 15% in Australia and 10% to 15% in Sweden while the U.K. will see smaller drops of 5% to 10%.
Shearing also notes that there are four stages of housing downturns and we have reached the third stage quite quickly so price declines could be just round around the corner.