ING’s chief international economist James Knightley is predicting there will be a correction in home prices later this year as new supply hits the market and reduced borrowing impacts sales. The average 30 year mortgage rate rose 5.3% last week, which he predicts will lead impact the market. He also notes, this reduced demand may impact construction, and in turn jobs months later as prices drop and demand abates. The only benefit of this he notes may be that falling home prices may help contain inflation, allowing the Fed to reduce rates, and averting a deeper economic slowdown.
