Economist David Rosenberg is pointing to a concerning trend in the current housing market. He notes that the annual rate of home sales has dropped below levels last seen in early 2008. This specific metric served as a key warning indicator right before the housing collapse that triggered the Great Financial Crisis.
Transaction activity remains low because potential buyers are sidelined by high mortgage rates. Meanwhile, homeowners remain hesitant to list their properties due to the lock-in effect of lower interest rates secured during the pandemic years. This dynamic has resulted in an anemic market where inventory levels are beginning to rise.
Data from the National Association of Realtors shows the annualized pace of existing home sales fell to 4.06 million in July. Rosenberg highlights that rising housing stock often pressures prices to move downward. As these price shifts occur, homeowners may experience a decrease in their perceived net worth.
This shift in property values could have a direct impact on the broader economy. When homeowners see their paper wealth decline, consumer spending often slows. Rosenberg argues that this wealth effect is a significant factor to watch as the market navigates these current conditions. While median sale prices are technically higher year-over-year, regional data suggests cracks are forming as demand continues to slump in several areas.