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Allison Schrager

The Fed’s Damage to the Housing Market May Last Years

The central bank created major distortions in a market where many Americans have most of their wealth. Why?

A Fed-fueled frenzy finally fifizzled.

A Fed-fueled frenzy finally fifizzled.

Photographer: Luke Sharrett/Bloomberg

With interest rates now hovering around 5%, existing-home sales are down more than 14% from last year. Some potential buyers are sitting on the sidelines until rates or prices or both decline, while sellers are hoping the market picks up again so they can get a higher price. 

But don’t count on rates falling to those pandemic lows. They were the result of extraordinary market manipulation from the Fed. And unless this becomes a regular feature of monetary policy, rates are not going back to what they used to be.