Wait, What? Wharton Professor Jeremy Siegel Says The Housing Market Is Going To Do This

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Wharton professor Jeremy Siegel predicts that the housing market will experience negative growth due to future Federal Reserve rate hikes that will push mortgage rates even higher.
With the average interest rate on a 30-year fixed-rate mortgage more than doubling this year, the housing industry has seen sales slow. The average 30-year mortgage rate this week was 6.81%, near its highest level since 2002, according to data from Freddie Mac.
Also Read: 10 Most Affordable Cities to Buy a Home
"I expect house prices to fall 10% to 15% and house prices are accelerating down," Siegel recently told CNBC.
With such a drop, the average selling price of a single-family home in the US would fall to just under $375,000 from its record second-quarter high of $440,000 -- ouch.
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In response to falling home prices, Siegel said he was more concerned that the Fed would do nothing.
This is because the Fed will act too late if it tries to control inflation by raising interest rates as it focuses on lagging data.
According to Siegel, the housing industry is the biggest culprit for the government's poor inflation control.
"Let's go to the real estate sector, which is up 0.7%," Siegel said in reference to the September CPI report, which showed inflation is still ahead of expectations. "I'm not at all surprised by the number because the number is ridiculous. It has no bearing on the actual rate of inflation. Housing construction, which accounts for almost 50% of the core rate, is the most distorted of all.”
New October inflation data shows Shelter rose 0.8% after rising 0.7% in September.
Also Read: Here's How Much Homebuyers Are Saving Each Month The Recent Drop In Mortgage Rates
"This is totally ridiculous. According to all indicators, real estate prices are going down, not up. Even the rents, yes they're going up from the contracts a year ago, but talk to the people about it [landlords], they say I can. I'm not getting the jumps [on rent] that I got earlier this year. That should be minus 0.7%, which by the way wipes out core inflation for September," Siegel said.
Siegel used the fact that housing indicators rose 40% from March 2020 to this summer's housing market peak to illustrate how the government is misrepresenting housing statistics.
“What do you think the CPI real estate factor was? 11%! Because of the delay with which the rising prices flow in," Siegel said.
If the Fed continues to hike rates, Siegel says the situation could last for several months, at which point the economy could enter a recession.
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