As data rolls in for April and May the housing market is clearly softening. In some cases, buyers have stopped searching for a home all together.
Why is the U.S. housing market finally shifting? There are three main reasons.
First, the Federal Reserve, the Central Bank have made it clear slowing down the housing market is a priority in curbing inflation thus the rise from 3.11% to 5.25% and as mortgage rates rise many home buyers are priced out.
Second, Housing economists are calling this an "overvalued" housing market. Data shows that 96% of regional housing markets are "overvalued" and have home prices that are above what local income levels can support. Economics dictates that home price growth is up 19.8 % while wage growth is 4.8%. these are not sustainable margins. The housing boom, with help from soaring mortgage rates, may have finally gone too far.
Third, the Fed is also attempting to slow down the red-hot labor market. Fed Chair Jerome Powell has acknowledged that pulling inflation back down will likely require an uptick in unemployment. There's something else. If a recession does come, employers could use their increased economic leverage to force staffers back into the office. If that happens, it could dry up the WFH buying boom.
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