- Home prices could tumble 20% in some of the hottest US markets, top investor Peter Boockvar said.
- He cited the surge in prices during the pandemic, and soaring mortgage rates pricing out buyers.
House prices could plummet 20% in some US cities as soaring mortgage rates scare off buyers, Peter Boockvar has said.
Bleakley Advisory's chief investor endorsed the Dallas Federal Reserve's grim forecast in a CNBC interview on Wednesday.
"In certain markets for sure, particularly the hot ones," he replied, when asked about the regional central bank's outlook.
Boockvar noted that home prices have soared 40% in the past two years alone, and climbed more between 2013 and 2022 than they did between 1998 and the peak of the housing bubble in 2007.
"It's an extraordinary rise, and now you have 7% mortgage rates, which are 15-year highs," he said. "It has all the ingredients to see a notable fall in home prices. But again, specifically in the hottest markets like Phoenix or Miami."
Still, the Bleakley chief noted that the vast majority of Americans with mortgages are paying rates below 5%. As a result, many will likely balk at selling up and taking out a more expensive mortgage for a new home, he said.
"The one thing that can mitigate a sharp decline is that dearth of inventory of existing homes," he said. "However, new homes — those inventories are building rapidly."
Boockvar also underscored the vast size of the US housing market, and warned a slump in prices could hit consumer spending and weigh on economic growth.
"Housing is almost 20% of the US economy, and almost 20% of the US economy is in a recession right now that will continue into next year," he said.
Boockvar is one of several experts predicting a housing downturn. Ian Shepherdson, Pantheon Macroeconomics' chief economist, has forecasted a 15%-to-20% drop in US home prices over the next year.
Similarly, Wharton professor Jeremy Siegel has warned house prices are poised to drop 15% from their peak, and could slide further if the Federal Reserve keeps hiking interest rates in an effort to curb red-hot inflation.
Paul Krugman, a Nobel Prize-winning economist, has also predicted a housing slump. He's explained that higher rates will likely sap demand for mortgages, resulting in less construction, reduced spending and hiring in the housing industry, and a broader economic slowdown.