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Conor Sen

The Strongest Sign Yet That Inflation Is Transitory

After a year of soaring prices, some builders — and homebuyers — are beginning to step back. The rest of the economy may follow suit.

Homebuyers are beginning to think twice about paying higher prices.

Homebuyers are beginning to think twice about paying higher prices.

Source: Bloomberg

Something seems to have changed in housing market psychology over the past month. Prospective buyers who find themselves in bidding wars might not have noticed it yet, but there are multiple signs that the market is beginning to cool.

Last week's consumer-price report, which came in much hotter than expected, made investors question whether inflation — turbo charged by reopenings and multiple rounds of fiscal stimulus — is only a passing phase. Fortunately for those who hope it is, rapidly shifting conditions are starting to provide evidence that, at least in the bellwether housing industry, rising prices are starting to cool demand. To the extent other industries begin to follow suit, that's a sign that whatever inflation we get over the next several months will end up being temporary.