Housing market 'staring into face of perfect storm,' expert warns

Housing market decline is 'bad sign' for American economy, Jerry Howard stressed

National Association of Home Builders CEO Jerry Howard warned consumers Friday the housing market is currently "staring into the face of a perfect storm" and argued that is a "bad sign" for the American economy. 

"Our own Wells Fargo NAHB Housing Market Index (HMI) declined three points this month because builders are saying things are going to ‘dry up.’ You've got a combination of the costs…regulatory compliance and now at the other end of the pipeline, interest rates are going up," Howard told "Cavuto: Coast to Coast."

The housing expert made these comments after pending home sales declined for the fourth consecutive month in February. Howard said he’s "very worried" that the market could "really slow down."

HOME SALES SEE BROAD NATIONWIDE DROP

Cavuto asked whether customers walk away if they’re preapproved for a mortgage and the price happens to increase significantly.

Howard said consumers have walked away even before signing their housing contracts, and this has been an issue nationwide. 

"What builders are doing to avoid that…is they're putting escalator clauses into their contracts," he explained. 

A sold sign is posted in front of a house in Washington, DC. (Photo by Stefani Reynolds / AFP) (Photo by STEFANI REYNOLDS/AFP via Getty Images) (Photo by STEFANI REYNOLDS/AFP via Getty Images / Getty Images)

"[Customers] come in and say, ‘You want to build a house?’ I'll tell you how much I think it's going to cost, but I'll also say ‘I can't be held to that. You're going to be liable if it goes up,’" Howard stressed.  

MORTGAGE REFIS DOWN 50% VERSUS YEAR AGO

According to a recent study from Zillow, home prices are rapidly increasing faster than people make in an entire year, projecting price growth to reach 22% year-over-year in May.

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Meanwhile, the Fed’s recent rate hike has resulted in rising borrowing costs, in addition to already historic highs for home prices. 

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"I am very, very concerned that we're going to see the housing markets slow down dramatically, which is a bad sign for the consumers, and it's an equally bad sign for the American economy. We're very worried right now," Howard concluded.