Don’t Sweat a Housing Crash as Long as Wages Are Rising
With the labor market still delivering raises to workers, people will be able to better handle higher mortgage rates, buying time for the home industry to find a balance.
Finding balance before a crash.
Photographer: Frederic J. Brown/AFP
The housing market has been searching for balance ever since mortgage rates rose above 5% at the end of April. Demand has fallen, and in response, homebuilders have cut back on housing starts. The torrid price appreciation of the past two years has ground to a halt, with the June S&P CoreLogic Case-Shiller index showing home prices grew at the slowest rate in two years.
In his speech at the Jackson Hole Economic Symposium last week, Federal Reserve Chairman Jerome Powell presented an economic outlook that suggests interest rates will be elevated for a sustained period of time, dashing the hopes that a pivot in monetary policy could lead to lower mortgage rates in 2023. Instead, the path to more normalized levels of housing market activity will depend on gains in worker incomes.