US mortgage rates will create 'dire' situation for real estate market, expert warns

30-year fixed mortgage hovers around 7% while home builder sentiment plummets

One U.S. market expert is echoing similar concerns as some of the nation’s top real estate industry leaders about the short-term future of the industry.

"As time goes on and people have to roll out of those 30-year loans that they have, I think we're going to see the effects in housing are going to be dire, but it's going to take longer this time than before," TJM Institutional Services managing director James Iuorio said Tuesday on "Mornings with Maria."

The Federal Reserve's aggressive interest-rate hike campaign sent mortgage rates soaring above 7% for the first time in nearly two decades, cooling the post-COVID, red-hot housing market.

Rates have been slow to retreat, hitting a fresh two-decade high last week. Freddie Mac reported that rates on the popular 30-year fixed mortgage are hovering around 7.09%, well above the 5.13% rate recorded one year ago and the pre-pandemic average of 3.9%.

REAL ESTATE EXPERTS SAY ‘CHALLENGES’ TO BUYERS AND SELLERS ARE THE ‘GREATEST EVER’

On top of high mortgages, there’s also a nationwide housing supply crunch: sales of previously owned homes tumbled 2.2% in July, while the National Association of Home Builders reported new home construction sentiment dropped six points in August.

James Iuorio on dire real estate

The U.S. real estate market could be headed towards a "dire" situation, TJM Institutional Services managing director James Iuorio said Tuesday on "Mornings with Maria." (Getty Images)

Federal Reserve Chair Jerome Powell has yet to be tested, according to Iuorio, calling out the central bank for having a little too much "confidence."

"There's never been a really material pullback in the stock market that would make him wonder if he's doing the right thing. So I think that that's a big risk to the market," the market analyst said. "I do think we're in a corrective phase, and I think that plays right into it."

Despite the negative real estate outlook, home improvement retail giant Lowe’s pre-market earnings estimate is expected at a 3% increase. But Iuorio called the positive data point "the last gasp of the housing head fake."

"It's a nice beat for Lowe's, but if you're asking me if I want to be in home builders when mortgage rates are at 7.5%, I'd have to say the answer to that is: no," he said.

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Looking at the U.S. economy as a whole, Iuorio detailed an inflationary period inching closer towards "the plague of the '70s."

"Car loan defaults have gone higher, credit card debt is over a trillion [dollars]," the market expert said. "What's more important about the credit card debt is that more people are rolling debt than have in the past. There's some bad signs for the economy, and I'm still in that recession camp, by the way."

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FOX Business’ Megan Henney contributed to this report.

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