Peter Schiff Sees 'Disaster Waiting to Happen' in Housing Market as Fannie Mae, Freddie Mac Shares Tumble, Says Home Prices Will Have to 'Implode'
Economist Peter Schiff warned that falling Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC) shares signal a potential housing market crisis, predicting home prices will have to fall as affordability pressures weigh on buyers.
In a post on X on Thursday, Schiff said Fannie Mae shares had fallen 23%, and Freddie Mac shares had dropped 21% in three trading days. He shared a video from his YouTube podcast, where he discussed the housing market and warned that falling home prices could trigger a broader crisis.
Schiff Warns Home Prices Must Fall
Schiff said in his podcast that both stocks were about 80% below their highs from the previous year. He called the housing market a "disaster waiting to happen," predicting that home prices would "have to implode." He argued that unsold home inventory was building because sellers remained reluctant to lower asking prices, while buyers could not afford homes at current prices because mortgage rates were too high.
"Eventually something has to give," Schiff said, arguing that sellers would have to cut prices because buyers could not afford to pay more or qualify for larger mortgages.
He warned that falling home prices could wipe out homeowners’ equity, leaving some borrowers owing more on their mortgages than their homes were worth. Schiff also said some homeowners could lose the incentive to keep making mortgage payments if they ended up with negative equity, even if they had fixed mortgage rates of 3% or 4%.
Affordability Woes Push Buyers to the Brink
Affordability pressures are already showing up in housing-market activity. In September, 14.5% of home-purchase agreements fell through, the highest rate for any September on record. Pending home sales also dropped 4% month over month, while mortgage rates climbed above 7% by the end of the month.
Chen Zhao, Redfin’s head of economic research, said the imbalance between buyers and sellers has also widened, giving buyers more negotiating power over prices, repairs, and closing costs. Slower sales could cause home prices to flatten or fall, particularly if sellers become more willing to make concessions.
Could Falling Home Prices Trigger a Bigger Crisis?
Leo Pareja, CEO of eXp Realty, has described the outlook as a softer market, with transaction volumes under pressure, while rejecting comparisons with the Great Recession. Pareja pointed to regional differences in home-price trends and said the current slowdown is more about fewer transactions than a broad collapse in prices.
Price Action: FNMA shares were down 65.89% year to date, while FMCC shares had fallen 67.16%. In after-hours trading, FNMA dropped 10.38% to $3.28, while FMCC fell 0.60% to $3.31.
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