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Interest Rates are Crushing Housing Market, Not Inflation

 Soaring US interest rates have done little to curb inflation, but they’re hitting housing hard. The surge in borrowing costs has eroded affordability for buyers, slowing residential sales and building activity, and threatening economic growth.

Completed and under-construction homes in Trappe, Maryland, on Oct. 28, 2022.

Falling Demand

Home sales and housing starts have slumped after peaking during the first couple of years of the Covid-19 pandemic, when low borrowing costs allowed millions to relocate.

How It Might Hurt

Housing downturns ripple through the economy. Real estate and construction account for millions of US jobs, and home sales have historically been a driver of consumer spending.

For many Americans a home is their biggest asset, so falling values can hurt confidence and spending. Prices have begun to roll over after a huge runup, but a crash isn’t inevitable. Many owners took advantage of low rates to refinance and may stay put. That could keep inventory low, helping support prices.

More stories like this are available on bloomberg.com

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