Catenaa,Monday, July 21, 2025- The U.S. housing market is tipping into deeper trouble and may soon drag down broader economic growth, Moody’s Analytics Chief Economist Mark Zandi warned this week, sounding what he called a “red flare” over rapidly weakening conditions.
In a series of posts, Zandi said key segments of the housing sector, home sales, new construction and prices, are all poised to slump unless mortgage rates, which hover near 7%, fall significantly. “That, however, seems unlikely,” he added.
Sales of new single-family homes plummeted 13.7% in May, while single-family housing starts dropped 4.6% in June. Building permits also fell.
Even homebuilders that had been offering mortgage rate buydowns to attract buyers are “giving up,” Zandi said, citing rising costs and land purchase delays.
The median home price remains under pressure. The Case-Shiller index of 20 major U.S. cities posted a 0.3% drop in April — steeper than March’s 0.2% decline. Meanwhile, 38% of builders cut prices in July, up from 29% in April.
Zandi also flagged a spike in property delistings, which rose 47% year-over-year in May as many sellers pulled homes off the market after failing to attract buyers.
He warned that rising supply from homeowners with pre-pandemic mortgage rates will soon collide with weak demand, sending prices even lower. “Housing will thus soon be a full-blown headwind to broader economic growth,” Zandi said.
Citi analysts echoed the alarm, saying housing is now signaling that current mortgage rates are too high to sustain economic expansion.
