American Real Estate Market Faces Dire Consequences Due to Escalating Mortgage Rates, Expert Cautions

Concerns Align as U.S. Real Estate Expert Predicts Challenging Times Ahead

Echoing the apprehensions of prominent figures in the real estate industry, a U.S. market expert has expressed similar worries about the immediate future of the sector.

James Iuorio, the managing director of TJM Institutional Services, shared his perspective during an appearance on “Mornings with Maria,” emphasizing the potential dire consequences for the housing market. Iuorio noted that as individuals transition out of their 30-year loans, the impact on housing could be significant, though this time the process might unfold more gradually.

The Federal Reserve’s vigorous campaign to raise interest rates propelled mortgage rates to a level exceeding 7%, a threshold not witnessed in nearly twenty years. This move cooled down the previously red-hot housing market, which had been surging post-COVID.

Despite this, mortgage rates have been slow to retreat and recently reached a new two-decade peak. According to Freddie Mac, the average rate for the widely used 30-year fixed mortgage is now around 7.09%, a notable increase from the 5.13% recorded a year ago and the pre-pandemic average of 3.9%.

Compounding the situation is a widespread shortage of available housing. July saw a 2.2% decline in sales of previously owned homes, while the National Association of Home Builders reported a six-point drop in new home construction sentiment for August.

Federal Reserve Chair Jerome Powell has yet to undergo a significant trial, as per Iuorio’s observations, who pointed out that the central bank might be slightly too self-assured.

According to the market analyst, Powell hasn’t faced a substantial stock market pullback that would prompt him to question his actions. This absence of testing poses a substantial risk to the market, he cautioned. Iuorio added that the current phase seems to be a corrective one, aligning well with this concern.

Amidst the less optimistic real estate outlook, the pre-market earnings projection for home improvement retail giant Lowe’s is anticipated to show a 3% growth. Nevertheless, Iuorio labeled this positive data point as “the final surge of the housing deception.”

He further expressed his reservation, stating, “While it’s a positive performance for Lowe’s, the prospect of being invested in home builders when mortgage rates are at 7.5% is not appealing.”

Taking a broader view of the U.S. economy, Iuorio outlined a trajectory that resembles the inflationary period experienced during the 1970s, often referred to as “the plague of the ’70s.”

“The increase in car loan defaults and the mounting credit card debt surpassing a trillion dollars,” said the market expert. “What’s even more concerning about the credit card debt is that more individuals are carrying debt than ever before. Several indicators are signaling economic distress, and I still hold the view that we’re heading into a recession.”