Will the housing slump ever end?
Probably not until mortgage rates come down


The post-pandemic housing slump isn't going away. "Home shoppers came into 2024 with optimism," said The Associated Press. But mortgage rates remain high and are expected to stay that way after "stronger-than-expected data on inflation" cast a pall on the likelihood that the Federal Reserve will lower interest rates. But it's not just the costs of a mortgage that are a problem: The supply of homes for sale is "historically low" while the prices have hit "record highs." Buyers can't buy. Sellers won't sell. Nobody's happy.
That combination of factors means the housing market is "poised to become a major drag on the economy heading into the election," said Politico. Home sales typically make up nearly a fifth of the economy, so the bad times can have major effects. "Home sales activity is at a 30-year low," said one economist. That means "all of the economic activity associated with home sales is at a depressed level." And it's not clear what it will take to shake the sector out of its funk. Said one industry analyst: "It could take a decade."
What did the commentators say?
"As Gen Z enters the housing market, many say they've given up on buying a home," Troy Palmquist said at HousingWire. Many of those young people see the process as an "insurmountable financial burden." This means it's time for real estate professionals to reframe those challenges. Yes, prices are high, but that means homes are "valuable long-term investments." And yes, interest rates are also on the high side, but historically they're "not as extreme as they seem." Perhaps most importantly, though, "homeownership remains a worthy and achievable goal."
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
One way to make the goal achievable? Change how we think about mortgages. The housing market is "frozen," said Peter McCoy at The New York Times, "because people who have 3 percent mortgage loans don't want to give them up for 7 percent loans on new homes." We can solve that by making mortgages "portable" — the loan you take out to buy your first house could be used to buy the next one, too, with the "same balance, interest rate and time remaining." The mechanics are complicated, but allowing portability could be a "'win-win' for borrowers and investors."
What next?
Any turnaround in the housing market is "still a year off," said The Orange County Register. Home prices have risen 5.7% in 2024, up from 3.9% a year ago. That could slow with an increase in the number of homes for sale combined with that mortgage-induced drop in demand — but that might not be enough for a real breakthrough. The biggest challenge is that "typical homes are no longer affordable to a middle-income household in the U.S.," said Zillow economist Skylar Olsen.
Any reduction in mortgage rates "might still be some time away," Hardika Singh said at The Wall Street Journal. The Federal Reserve isn't quite ready to start cutting rates. "We're looking for something that gives us confidence that inflation is moving sustainably down," said Chair Jerome Powell. Until that happens, America's housing market will probably continue to slump.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Joel Mathis is a writer with 30 years of newspaper and online journalism experience. His work also regularly appears in National Geographic and The Kansas City Star. His awards include best online commentary at the Online News Association and (twice) at the City and Regional Magazine Association.
-
Wine-tasting in Tuscany
The Week Recommends From biodynamic vineyards to historic cellars, the picturesque region is a wine lover's dream
By Irenie Forshaw, The Week UK
-
Ukraine-Russia: is peace deal possible after Easter truce?
Today's Big Question 'Decisive week' will tell if Putin's surprise move was cynical PR stunt or genuine step towards ending war
By The Week UK
-
The bougie foods causing international shortages
In the Spotlight Pistachios join avocados and matcha on list of social media-driven crazes that put strain on supply chains and environment
By Harriet Marsden, The Week UK
-
Why does the US need China's rare earth metals?
Today's Big Question Beijing has a 'near monopoly' on tech's raw materials
By Joel Mathis, The Week US
-
How will Wall Street react to the Trump-Powell showdown?
Today's Big Question 'Market turmoil' seems likely
By Joel Mathis, The Week US
-
What is the job market's future after Trump's tariffs?
Talking Points Economic analysts are split on what the tariffs could mean for employees
By Justin Klawans, The Week US
-
How Trump's 'Liberation Day' might affect the economy
Talking Points Tariffs will rise, but consumer confidence is down
By Joel Mathis, The Week US
-
Could a private equity deal be the end of Walgreens?
Today's Big Question The pharmacy chain will be taken private in a $10 billion deal
By Justin Klawans, The Week US
-
How will the Fed manage Trump's economy?
Today's Big Question Jerome Powell is 'in a bind'
By Joel Mathis, The Week US
-
Eggs too pricey? Rent a chicken.
Under the Radar The cost of eggs increased more than 15% in January
By Justin Klawans, The Week US
-
What is a sovereign wealth fund?
The Explainer And will Trump use one to buy TikTok?
By Joel Mathis, The Week US