From the NY Post:
Pain across the US housing market that began last year is likely just getting started if interest rates remain high, star economist Ken Rogoff warned on Tuesday.
Rogoff, a professor at Harvard University and former top economist at the International Monetary Fund, said home prices in both the US market aboard will fall “certainly another 10%” over the “couple of years.”
The economist cited the restrictive policy stances taken by the Federal Reserve and other central banks, which have caused a spike in mortgage rates and cooled demand among buyers.
“If, as I think, interest rates are going to stay high for some time to come, I think there’s still a lot of downward adjustments in the housing markets globally, not just in the United States,” Rogoff told Bloomberg Television during an appearance at the World Economic Forum in Davos, Switzerland.
The Federal Reserve is expected to implement more interest rate hikes early this year after a string of seven straight supercharged interests in 2022. Fed Chair Jerome Powell has signaled that rates will rise and then hover in restrictive territory until policymakers have clear evidence that inflation has cooled.
Rogoff noted that the housing and stock markets each tend to struggle whenever central banks hike interest rates – though downticks in home prices tends to occur a longer period of time.
“Equities and housing move in sync with interest rates, but equities move much faster. Housing famously, prices, especially down, move much more slowly. People sit on their house, they don’t want to sell their house,” Rogoff said.
Rogoff’s estimate for home prices is conservative compared to some other experts. Pantheon Macroeconomics chief economist Ian Shepherdson has predicted that prices will sink 20% by later this year.