Confused about the housing market? Here’s what’s happening now – and what could happen next

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The slowdown in the otherwise red-hot housing boom has been stunningly swift.
The U.S. housing market surged during the pandemic as homebound people sought new places to live, boosted by record-low interest rates.

Now, real estate agents who once reported lines of buyers outside open houses and bidding wars on the back deck say homes are sitting longer and sellers are being forced to lower their sights.

That has both potential buyers and sellers wondering where they stand.

“As recession concerns weigh on consumer outlooks, our survey shows uncertainty has made its way into the minds of many buyers,” said Danielle Hale, chief economist at

Here are the major factors behind the topsy-turvy housing market.

The slowdown in the otherwise red-hot housing boom has been stunningly swift.

The U.S. housing market surged during the pandemic as homebound people sought new places to live, boosted by record-low interest rates.

Now, real estate agents who once reported lines of buyers outside open houses and bidding wars on the back deck say homes are sitting longer and sellers are being forced to lower their sights.

That has both potential buyers and sellers wondering where they stand.

“As recession concerns weigh on consumer outlooks, our survey shows uncertainty has made its way into the minds of many buyers,” said Danielle Hale, chief economist at

Here are the major factors behind the topsy-turvy housing market.

Mortgage Rates

The main driver of the slowdown is rising mortgage rates. The average rate on the 30-year fixed mortgage, which is by far the most popular product today, accounting for more than 90% of all mortgage applications, started this year right around 3%. It is now just above 6%, according to Mortgage News Daily.

That means a person buying a $400,000 home would have a monthly payment about $700 higher now than it would have been in January.

High prices, low supply

The other drivers of the slowdown are high prices and low supply.

Prices are now 43% higher than they were at the start of the coronavirus pandemic, according to the S&P Case-Shiller national home price index. The supply of homes for sale is growing, up 27% at the start of September compared with the same time a year ago, according to While that comparison seems large, it’s still not enough to offset the years-long shortage of homes for sale.

Active inventory is still 43% lower than it was in 2019. New listings were also down 6% at the end of September, meaning potential sellers are now concerned as they see more houses sit on the market longer.

Paul Legere is a buyer’s agent with Joel Nelson Group in Washington, D.C. He focuses on the competitive Capitol Hill neighborhood, and he said he saw listings jump by 20 to 171 just after Labor Day. He now calls the market “bloated.” As a comparison, just 65 homes were listed for sale in March.

“This is a very traditional post Labor Day inventory bump and seeing in a week or so how the market absorbs the new inventory is going to be very telling,” he said. “Very.”

Inventory is taking a hit nationally because homebuilders are slowing production due to fewer potential buyers touring their models. Housing starts for single-family homes dropped 18.5% in July compared with July 2021, according to the U.S. Census.

Homebuilder sentiment in the single-family market fell into negative territory in August for the first time since a brief dip at the start of the pandemic, according to the National Association of Home Builders. Builders reported lower sales and weaker buyer traffic.

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz in the August report. 

 Some buyers are hanging in

Buyers, however, have not disappeared entirely, despite the still-pricey for-sale market and the equally expensive rental market.

“Data indicates that some home shoppers are finding silver linings in the form of cooling competition for rising numbers of for-sale home option,” said’s Hale. “Especially for buyers who are getting creative, such as by exploring smaller markets, this fall could bring relatively better chances to find a home within budget.”

Home prices are finally starting to cool off. They declined 0.77% from June to July, the first monthly fall in nearly three years, according to Black Knight, a mortgage technology and data provider.

While the drop may seem small, it is the largest single-month decline in prices since January 2011. It is also the second-worst July performance dating back to 1991, behind the 0.9% decline in July 2010, during the Great Recession.

Affordability woes

Still, that drop in prices will do very little to improve the affordability crisis brought on by rising mortgage rates. While rates fell back slightly in August, they have risen sharply again this week, making for the least affordable week in housing in 35 years.

It currently takes 35.51% of median income to make the monthly principal and interest payment on the median home with a 30-year mortgage and 20% down. That’s up marginally from the prior 35-year high back in June, when the payment-to-income ratio reached 35.49%, according to Andy Walden, vice president of enterprise research and strategy at Black Knight.

In the five years before interest rates began to rise, that income-to-payment ratio held steady around 20%. Even though home prices surged in the 2020 and 2021, record-low interest rates offset the increases.

“Given the large role affordability challenges appear to be playing in shifting housing market dynamics, the recent pullback in home prices is likely to continue,” Walden said.

A new report from real estate brokerage Redfin showed that while homebuyer demand woke up a bit in August, the latest increase in mortgage rates over the past week put it right back to sleep. Fewer people searched for “homes for sale” on Google with searches during the week ending Sept. 3 – down 25% from a year earlier, according to the report.

Redfin’s demand index, which measures requests for home tours and other home-buying services from Redfin agents, showed that during the seven days ending Sept. 4, demand was up 18% from the 2022 low in June, but still down 11% year over year.

“The housing market always cools down this time of year,” said Daryl Fairweather, Redfin’s chief economist, “but this year I expect fall and winter to be especially frigid as sales dry up more than usual.”


When Will Home Prices Fall? Here’s What Experts Predict


Soaring mortgage rates, tremendous demand and limited inventory are pushing home prices up, but some experts say relief is on the way. Just not in the near future.

Home prices grew 20.6% year-over-year in March, the fastest annual surge in 35 years, according to a report released Tuesday by S&P Global. In some cities, that number is even higher: Tampa (34.8%), Phoenix (32.4%) and Miami (32.0%) saw the largest price gains.

The data, which comes from S&P’s CoreLogic Case-Shiller Index, tracks the value of single-family housing in the U.S.

It gets reported on a two-month delay, and prices continued to rise beyond the month of March, albeit at a slower pace. The median sales price of an existing home (not new construction) in April was $391,200, according to data from the National Association of Realtors (NAR). That’s 14.8% higher than in April 2021.

Experts generally agree that prices this high, combined with mortgage rates above 5% and soaring inflation, are not sustainable in the long term, since they price so many buyers out of the market. Soon, sellers will have to adjust.

“As buyer confidence sags and weighs down demand, real estate markets will re-balance, eventually tilting away from the heavy advantage that recent home sellers have enjoyed,” Chief Economist Danielle Hale wrote in a blog post this week.

When will home prices fall?

Nearly 20% of sellers dropped their prices during the four weeks ending on May 22, according to data from Redfin. But that doesn’t mean that houses are getting more affordable just yet.

Because mortgage rates are so high, the monthly payment on a home listed at the median asking price was $2,425 during that same period — $717 higher than a year prior.

Buyers looking for newly built homes also face historically high construction costs thanks to supply chain issues and material shortages.

Mark Zandi, the chief economist at Moody’s Analytics, predicts prices will eventually flatten across most of the country, especially in the hottest housing markets of the pandemic era — like Boise, Colorado Springs, Las Vegas and Phoenix.

“Sky-rocketing house prices are set to come back to earth as higher rates crush affordability,” Zandi tweeted last week.

For now, those waiting to buy until the market cools will have to keep biding their time.

“Although one can safely predict that price gains will begin to decelerate, the timing of the deceleration is a more difficult call,” Craig Lazzara, Managing Director at S&P Dow Jones Indices, said in a news release.

Written by Sarah Hansen for

THE BIZ: The housing market hits a level not seen since the last bubble



You’d be hard-pressed to find housing economists proclaiming that the ongoing housing boom is nearing a 2008-type bust. In fact, many say the opposite, based on the belief that the demographic wave of millennial first-time homebuyers, elevated wage growth, and limited supply will all continue pushing the market upwards. Every major real estate firm with a publicly available forecast, including CoreLogic and Fannie Mae, predicts that home prices will go even higher over the coming year.

That said, the red-hot U.S. housing market is beginning to hit levels not seen since our last housing bubble.

Black Knight, a mortgage technology and data provider, showed Fortune an analysis on Friday that finds the typical American household would now have to spend 31% of their monthly income to make a mortgage payment on the average-priced U.S. home. That’s up from 29% just one week earlier, and up from 24% in December. Black Knight’s mortgage-payment-to-income ratio—which averaged 19.9% during the 2010s decade—hasn’t topped 31% since September 2007.

What’s going on? The economic shock caused by soaring mortgage rates over the past few weeks has dramatically increased mortgage payments for new homebuyers.

Back in December, the average 30-year fixed mortgage rate stood at 3.11%. A borrower taking on a $500,000 mortgage at that rate would owe $2,138 per month. Now that the average rate is at 5%, that loan if issued today would cost $2,684 per month. Over the course of the 30-year loan, that’s an additional $196,700.

In March, a team of researchers at the Federal Reserve Bank of Dallas got the attention of the real estate industry after publishing a paper titled Real-time market monitoring finds signs of brewing U.S. housing bubble. They found that recent U.S. home-price growth—which is up 19.2% over the past 12 months—is once again becoming “unhinged” from economic fundamentals.

However, the Dallas Fed researchers don’t see this as a 2008 repeat. Sure, many new homebuyers are getting stretched financially in a way that resembles buyers during the last bubble. But that’s just new homebuyers. If you look broadly at homeowners, they’re doing quite well.

As of the fourth quarter of 2021, only 3.8% of U.S. disposable personal income was going toward mortgage debt payments. At the height of the 2000s housing bubble, that figure was nearly double at 7.2%. This time around, households’ balance sheets look healthier, and more homeowners have paid off their mortgage altogether. In addition, the shady lending practices of the aughts were regulated out of the market by the 2010 Dodd-Frank Act. Simply put: If a storm does come, homeowners, in theory, should be better positioned to ride it out.

“Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007–09 global financial crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom,” write the Dallas Fed researchers.

It’s possible the affordability crunch created by soaring mortgage rates could be a good thing. That’s according to Logan Mohtashami, lead analyst at HousingWire. Spiking mortgage rates, he says, could take some steam out of the market and give inventory a chance to rise a bit. If that happens, it could slow down the rate of home price appreciation and reduce the likelihood of the red-hot housing market culminating in an overheated market—or even worse, a housing bust.

“Higher mortgage rates are the best thing for housing because we are in a savagely unhealthy housing market, and we need to get off these extreme low levels of inventory,” Mohtashami told Fortune. “It isn’t too much or bad credit chasing homes this time around. It’s too many people chasing too few homes. We desperately need a breather.”

According to Redfin, spiking mortgage rates are already softening the housing market a bit. The brokerage platform is seeing slightly more home listings with price cuts and fewer bookings for home showings. However, we’ll need to wait a few weeks—or months—before we can be sure that the housing market is actually softening.

Link to article here:


THE MARKET: Home value increases surpassed median salaries in 25 metro areas last year, report says



The term “household income” was given new meaning in 2021 as a banner year for home appreciation found houses themselves earning more than the median worker in major metros across the country. 2021 was a year of haves and have-nots, and the chasm between the two widening throughout. Those who owned a home saw their household wealth increase dramatically. But many renters witnessed that dream either soar out of reach or had to drastically adjust their expectations and plans.

Home value appreciation in 2021 was higher than median wages in 25 of 38 major metropolitan areas, with appreciation reaching higher than $100,000 in 11 of them. Though San Jose has the highest median salary at $93,000, it also led all major metros in annual home value appreciation — with the typical home growing a whopping $229,277 over 2021, nearly what oral surgeons make. 

Expensive coastal markets in California and Hawaii saw home value growth wallop incomes by the largest amounts. San Jose led but San Francisco closely followed, with homes earning $129,914 more than the median salary. Boise, Salt Lake City, Seattle and Phoenix rounded out the top 10. 

Metropolitan areas with the lowest home price appreciation relative to median salaries were Detroit, St. Louis and Baltimore, though even the smallest home value growth among these metros, in St. Louis, was still higher than $27,000. 

While homeowners watched their assets multiply in 2021, the chasm separating many renters from homeownership widened, as home prices skyrocketed and rising rents eroded their ability to save for a down payment.

Rents rose 16% across the U.S. in 2021 and upward of 25% in popular Sun Belt locales like Miami, Phoenix and Las Vegas. Locking in a one-year lease on a typical U.S. rental cost $3,072 more at the end of the year than the start of the year. It was $7,104 more in Miami, $4,644 more in Phoenix and $4,380 more in Las Vegas — major hits to a household budget, as that money can’t be saved toward a down payment. 

At the same time, down payments — often the highest hurdle to homeownership for first-time buyers — rose by more than $10,000 in 2021 for a typical 30-year fixed mortgage. Sticking with our metros used in the rent comparison, typical down payments rose nearly $14,500 in Miami, more than $20,600 in Phoenix and $16,700 in Las Vegas. 



6 reasons you should sell your home right now



While it’s a notoriously tough time to buy a home, the incentives to sell the one you’re in could be too good to pass up.

Most (89%) of current homeowners who want to list their homes right now say something is preventing them from doing so, according to NerdWallet’s recently released 2022 Home Buyer Report. The most commonly cited roadblocks: concerns about finding a new house and paying too much for a new house.

It’s true that finding a home and especially finding one that fits all of your needs is a challenge right now. Competition over the few homes on the market is driving prices up. It’s taking multiple offers and sometimes a hot tip on a house not yet listed to close a deal. However, current owners have an edge. By making the most of the market on the seller side, they’ll enter the buyer side with more money to fuel their buying power.

Buyers want your home

Inventory is so low, there are likely multiple buyers looking for a home like yours right now.

In 2019, there were 1.3 million homes on the market in any given month, on average. By 2021, the number of active listings had fallen by 57%, to 540,000 on average, according to NerdWallet’s analysis of data. There was already a home shortage before the pandemic, but COVID-19 took a bad situation and made it worse. Now, homes are selling within days, not weeks or months, and commanding multiple competitive offers. That demand shows few signs of letting up.

Nearly 26 million Americans say they plan to buy a home this year, according to the Home Buyer Report. That number is unrealistic — typically 5 million to 6 million homes are sold each year — but it does indicate the flood of buyers isn’t likely to subside.

Selling now may mean a bigger profit

High demand in the face of low supply has made for record high prices. This means you’re more likely to pay off your current mortgage and walk away with a profit than you would’ve been just a few years ago.

Homes are also being listed at higher prices, and selling at or above asking price. In fact, buyers typically paid 100% of the list price in 2021, and 29% paid more than list price. While the sales price represents your ultimate financial benefit, getting offers over what you expect brings added excitement to the transaction.

Typical sale prices grew from $270,000 on average in 2019, before the pandemic, to $344,000 in 2021, according to data from the National Association of Realtors. And in some places, they’ve grown even more.

About three-quarters (74%) of sellers did not have to reduce their asking price at all in 2021, compared with 60% in 2019 and 39% a decade ago in 2011, according to NerdWallet’s analysis. The analysis covered 10 years of data from the NAR’s annual Profile of Home Buyers and Sellers report.

Closing day may come more quickly, with fewer sacrifices

Buying or selling a home is never a stress-free transaction, but selling now is far easier than in recent years. Not only do you stand to have multiple competitive offers, but you’re also more likely to cruise through closing with fewer frustrations.

Homes are moving quickly

In 2021, homes were typically on the market for a single week, compared with 3 weeks in 2019, and 11 weeks in 2012 and 2013, according to our analysis of NAR data.

Sellers are having to give up less

It’s relatively common for sellers to do some wheeling and dealing during the closing process — offering a warranty or money for repairs to the buyer, for instance. But those perks have become less common.

Almost three-fourths of sellers didn’t offer any incentives to attract buyers in 2021, compared to about 60% 10 years ago, according to our analysis of NAR data. The share of those offering a home warranty fell from 23% to 13% during that same period, and the share of sellers assisting with closing costs fell from 20% to 9%.

You’re more likely to walk away pleased

Closing on a home sale can leave you with lessons learned, if not regrets. But in this market, that’s less likely. Seven in 10 (70%) sellers walked away from the home selling process “very satisfied” in 2021. A decade ago, just 54% could say the same, according to NAR data.

Also read: ‘We live 5 minutes from our in-laws who have a larger home’: Is it a good idea to swap houses? Will I end up with a surprise tax bill?

So, should you list?

If you’ve been thinking of selling, but are on the fence because you don’t want to join the competitive pool of buyers, consider these questions:

Are you willing and able to move somewhere more affordable?

If yes, the profits from your sale will go further in a less competitive market. Not everyone wants to move to a rural setting (like I did), but your offers will be more attractive to sellers in areas where demand isn’t as hot. You’ll be able to make a larger down payment and possibly reduce your new mortgage’s term, both of which stand to save you considerably over the long term.

Are you ‘over’ homeownership?

If yes, it’s perfectly fine to go back to renting, or move in with someone else who has a deed or a mortgage. Owning a home isn’t for everyone, and it doesn’t have to be forever. Further, owning a home can be expensive — 1 in 5 homeowners say affording home repairs and maintenance is among their top financial stressors for the next two years, according to the NerdWallet 2022 Home Buyer Report.

Are you highly motivated?

If yes, you’re more likely to have what it takes to be a buyer in today’s market. Finding a house you like will take time, and you might have to make offers on several homes before you go under contract. Being tenacious and knowing what challenges await you can better equip you for the potential battle ahead.

Written by Elizabeth Renter for

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