A top economist has warned that the U.S. housing sector, which is struggling with problems in both building and sales, might soon have an impact on the country’s economy as a whole.
“I sent off a yellow flare on the housing market in a post a couple of weeks ago, but I now think a red flare is more appropriate,” Moody’s Chief Economist Mark Zandi wrote on X.
The “red flare” warning, which signals significant instability and the possibility of a further decline, coincides with a slowdown in sales and new construction activity as well as a market that some analysts had warned was already experiencing severe challenges at the start of the year.
The problems in the housing market may easily spread to the rest of the economy, acting as a “full-blown headwind” to growth and escalating concerns of a recession in the upcoming months, as Zandi noted on Sunday.
Zandi, who has issued a number of warnings this year over the state and future of the American economy under President Donald Trump, stated that he was concerned about the ongoing high mortgage rates that have put pressure on several facets of the housing market.
“Home sales, homebuilding, and even house prices are set to slump unless mortgage rates decline materially from their current near 7% soon,” Zandi said.
He went on to say that American home sales were already “uber depressed.” New single-family home sales in May plummeted 13.7% month-over-month and 6.3% below the rate in May of last year, according to the Census Bureau’s most recent report.
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