Moody’s chief economist Mark Zandi has escalated his warning on the US housing market from cautious optimism to a “red flare.” Just weeks ago, he signaled resilience in the economy and attributed the softening housing market this spring to “yellow flares” rather than a deeper issue. However, now, Zandi believes home sales, new home construction, and house prices are set to slump unless mortgage rates fall significantly from their current 7% range.
Existing home sales have been stuck at historic lows since the pandemic housing boom ended in mid-2022. The housing sector has been in a slump, with continued job losses and slashed commissions for mortgage brokers and agents as transaction volumes receded. However, Zandi believes this downturn could worsen, with builders postponing land deliveries, typically preceding a drop in construction activity.
According to Zandi, unsold inventory is at its highest level in 15 years, with the number of unsold completed homes hitting 119,000 in May 2025 – the highest it’s been since July 2009. Home price declines are likely, especially in the South and West regions, where affordability is lowest and there has been more construction. Zandi expects national house prices to fall by a mid-single-digit percentage over the next 18 to 24 months.
The warning suggests that the housing downturn is broadening, with existing home sales being dragged down by lock-in and affordability barriers. However, regional markets are also at risk, particularly in the South and West, where builders are starting to cut prices outright.
Source: https://www.fastcompany.com/91370975/housing-market-red-flare-moodys-chief-economist-sees-home-price-declines-spreading