Existing home sales fell slightly for a third straight month, according to April data released by the National Association of Realtors. A finance and economics professor at the George Washington University says a slowdown in home prices and production could soon follow.
Robert Van Order holds the Oliver Carr Chair in Real Estate at GW and is the co-chair of the Department of Finance. His expertise includes mortgage markets, default risk and house prices. Van Order says tight monetary policy is hitting housing markets hard and it’s happening in stages, the first of which is this recent decline in sales. The next stage is a slowdown or decline in home prices.
“While prices are still rising, because demand is still high and production has been low, that will stop soon because of interest rates, a slow-down in the economy, and a change in expectations about housing being a good investment,” Van Order says. “This will lead to the third stage, declining production: builders produce less when the selling price is declining.”
Professor Van Order adds, “Policy-wise, there are few options as long as inflation is the main problem. What is left is to stimulate production, which has not fully recovered from the crash in 2008. This would take time because it would involve things like zoning and other regulatory changes, which is not likely to happen soon. What is left is a bad housing market for the near future.”
If you are looking for context on the housing market or would like to speak with Professor Van Order, please contact Cate Douglass, GW Media Relations Specialist, at [email protected] or 202-994-6460.