Luis Solis, a real estate agent in Portland, Ore., marked a milestone weekend late last month.
An offer finally came in, but instead of being 10 to 15 percent higher than the listing — something that became almost standard at the height of the coronavirus pandemic’s housing market — it was right at $500,000.
Taking some air out of the crazed market — and the hot economy in general — is precisely what the Federal Reserve wanted to do when it raised its key interest rate in March and signaled more increases to come.
That rise means the monthly payment on a $500,000 house like the one Mr. Solis just sold would be about $500 more a month than it was at the end of last year, assuming a fixed-rate mortgage and 20 percent down payment.
In a recent survey of builders, Zelman & Associates, a housing research firm, found that while builders were still seeing strong demand, cancellations had inched up, though still well below historically low levels.
Home prices remain high, and not only is there little sign they will fall anytime soon, but many economists predict a continued rise through the year.
For buyers, however, the market will still feel plenty competitive.
In the prepandemic world of bustling offices and smoothly functioning supply chains, such a steep rise in mortgage rates, on top of years of double-digit price appreciation, would have economists predicting a severe drop in demand and maybe even falling prices.
The problem is there are so few homes for sale that even a slower market is unlikely to create enough inventory to satisfy demand anytime soon.
“I sold my house yesterday in St.
Members of the millennial generation, now in their late 20s to early 40s, are in their prime home buying years.
Shutdowns in the early months of the pandemic slowed home building, but housing starts have been on an upswing lately.
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today.
Where is inflation headed? Officials say they do not yet see evidence that rapid inflation is turning into a permanent feature of the economic landscape, even as prices rise very quickly.
The prices, the lack of supply, the feeling that the only way to win a bidding war is to waive contingencies and inspections: All of this has worn out buyers like Armando Villanueva, a 34-year-old accountant in Whittier, Calif.
Finally, as the year neared its end, they offered $825,000 on a home listed for $750,000.
Increases in the Fed’s policy rate, a tool that combats rising inflation, might even temporarily do the opposite in the current housing market: If first-time buyers find that climbing mortgage rates and home prices put owning a home out of reach, they may linger in apartments or single-family rentals for longer.
Apart from making it harder for people to pay their bills, higher rent could also make it harder for the Fed to drive inflation lower.
Household incomes have climbed over the last year as wages increased and the country staged a rapid labor market rebound, but consumers are paying higher prices for gas, groceries and a host of other products, outweighing gains for many people.
So far, the greatest signs of the housing market’s slowing have shown up on the West Coast, where the budgets of aspiring buyers seem to have been broken by rising interest rates.
In California, for instance, home tours in the last week of March dropped from a year earlier.