Housing Outlook: We Expect Defaults to Remain Low as Prices Decline

Tuesday 13 December 2022

Investment Talks

Housing Outlook: We Expect Defaults to Remain Low as Prices Decline

December 2022 | While we are bearish on the outlook for home prices, we are bullish on the outlook for mortgage defaults. Importantly, we do not expect a repeat of the housing crisis of 2008, nor a surge in distressed sales. This is because the vast majority of today’s borrowers have fixed-rate mortgages, and mortgage modifications are heavily prioritized over foreclosure. However, we do expect declines in home prices of roughly 15% over the next three years, with the majority of the decline occurring in 2023.

01 | We expect a 15% cumulative decline in home prices over the next three years. After recent home price gains and the doubling of mortgage rates, affordability is poor for prospective buyers with median family incomes.

02 | The magnitude of potential price declines may be muted by a shortage in housing supply and a structural increase in housing demand.

03 | Across most scenarios, we expect mortgage defaults to remain low. Underwriting standards have been pristine, and rising rates are of limited concern to existing owners.

We Expect defaults to Remain Low as Prices Decline

Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of December 13, 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.

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