Housing Pain to Continue Until Economy Slows and Prices Fall
The West Coast, for the past decade a leader in the boom, is stumbling, while Eastern and Southern cities are holding up better.
Illustration: Maria Chimishkyan for Bloomberg Businessweek
For millions of Americans, the end of cheap money hit home—literally. The Federal Reserve’s rapid-fire interest-rate increases paralyzed the housing market as buyers decided to wait for lower prices and relief from mortgage rates that had doubled. Would-be sellers kept inventory scarce by clinging to low-interest loans and memories of home values that hit records in the pandemic. Pending sales plunged 39% in November from a year earlier to the second-lowest level on record—behind only April 2020, when the US was locked down.
What will break the logjam? That depends on the Fed’s actions, whether the US economy goes into recession and, crucially, where you live. Many projections suggest that unemployment will begin to rise, further slowing buyer activity and forcing some owners to sell, resulting in lower prices. That all could help satisfy the central bank’s goal of cooling the overheated economy, leading to the end of the rate increases that have been the primary brake on deals.