Thru the Cycle President John Lonski discusses the global sell-off and the current state of the real estate industry.
For first-time home buyers, the big break may come at some point, but one economist warns it won’t happen until after a recession.
In an appearance on “Varney & Co.” on Tuesday, John Lonski, president of Thru the Cycle and a veteran economic forecaster, said first-time buyers may be able to buy again after the next recession, which “may not be that far away.”
“You know, the recession could start as early as October of this year. But I would imagine it will start sometime in the next 12 months. That’s the first step to lowering real estate prices,” Lonski said.
He told host Stuart Varney that we “need to get house prices down” and that the industry may go through a period of house price deflation.
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Mortgage buyer Freddie Mac said Thursday the average interest rate on a 30-year loan fell to 6.47 percent, the lowest in more than a year. While that’s down from a peak of 7.79 percent in the fall, it’s still significantly higher than the pandemic-era low of just 3 percent.
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“Obviously, if there’s a recession, you’re going to see a much lower 10-year yield. I think the 10-year yield after the next recession will go down to 2.5%, which is that average. That’s just the average from 2017 to 2019. And that would be equivalent to a 30-year mortgage at about 4.2%,” Lonski said.
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The expert added that the yield on a 10-year bond would have to be close to 3% to make housing affordable.
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“This economy needs a correction,” Lonski stressed.
“Perhaps part of that correction will be a change in leadership in Washington in November of this year,” he said.
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Megan Henney of FOX Business contributed to this report
