Economics Weekly: Curb Your Enthusiasm for a Housing Recovery

The U.S. housing recovery has stalled as mortgage rates remain above 6%, creating a price and affordability crisis that keeps both buyers and sellers on the sidelines. Despite underlying demand, builders are facing high inventories and are being forced to offer incentives, while structural supply deficits continue to grow.

Key Takeaways

• 1.The U.S. housing market is currently stalled not due to a lack of demand, but because of extreme affordability constraints driven by mortgage rates remaining above 6%.
• 2.There is a notable price divergence between new and existing homes; builders are cutting prices and offering incentives to clear inventory, whereas existing home prices remain elevated.
• 3.Structural supply shortages are likely to worsen as builders break less new ground in response to current market volatility and high interest rates.

Table of Contents

• Not Enough Homes to Go Around
• Lower Mortgages Can Unlock Homes
• Population Growth and Immigration
• Federal Deregulation
• What the Corporate Sector Is Saying
• Conclusion
• Highlights in the Week Ahead
• Indicators of the Week: Consumer Price Index & Producer Price Index
• Economic Scorecard

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