The current troubles in the American housing market are an important sign that the broader U.S. economy is slowing. The inevitable results of wrongheaded economic policies are finally overpowering the massive stimulus that was perpetrated in response to the COVID-19 lockdowns.
Particularly egregious and disastrous were the reckless spending increases by President Joe Biden and congressional Democrats—with no Republican votes at all—in 2021 and 2022 after the economy had already recovered.
To stop the inflation caused by that overspending, the Federal Reserve (Fed) tightened the money supply significantly in 2022 and early 2023. That increased mortgage interest rates from around 3 percent a couple of years ago to nearly 7 percent now. That, in turn, has driven the home sales index to its lowest point this century—even lower than during the late-2000s housing crisis and the 2020 lockdowns.
New home sales fell by 14.9 percent from April to May, the largest month-to-month drop since September 2022. Sales of new homes decreased in June by an additional 0.6 percent. “That leaves new home sales down 7.4% YoY,” ZeroHedge reported.
“It is the slowest pace of home sales in any June since 1999, when the NAR began tracking the data,” Morningstar reports.
Financial commentator Peter Schiff accurately calls this “a Fed-induced housing crisis” caused by “wasteful government spending and expansionary monetary policy.”
The interest rate increases the Fed imposed to stop Bidenflation are pushing housing prices higher because homeowners with low-cost mortgages are discouraged from putting their houses up for sale. They don’t want to spend 7 percent on a new mortgage when they are paying 3 percent now. The consequent artificially induced decrease in housing inventory raised the median selling price of an existing family home in the United States from $378,600 in January of this year to a record $426,900 in June—4.1 percent higher than a year earlier.