US home prices could tumble nearly 20% and Fed economists warn further rate hikes risk an even worse housing correction: 'The bubble hypothesis merits attention'
The US housing market faces a potential 19.5% correction, and more rate hikes from the central bank could make a crash even worse,The global housing market has become frothy since 2020 as a result of the pandemic boom, according to authors Lauren Black and Enrique Martínez-García, and there's still a risk of a deep housing slide despite signs of easing home-price growth.
"[I]f the observed price-to-rent ratio grows at an explosive rate relative to its fundamental-based ratio estimated with long-term interest rate and rent growth data, the bubble hypothesis merits attention," they said. There were signs that the US price-to-rent ratio began to fall in third quarter as prices cooled faster than rents, they added.
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