SCOTT SIMON, HOST:
The housing market is cooling. Sales of both new and existing homes are dropping. What does that mean for homebuyers and the overall economy?
NPR's Camila Domonoske explains.
CAMILA DOMONOSKE, BYLINE: This summer, Sara Murawski's real estate agent asked her how long she'd been looking at houses.
SARA MURAWSKI: I was like, you know, I've wanted a house since I was 12, but I actually started looking to buy around 21 (laughter).
DOMONOSKE: Murawski's 34, and she's serious. She dreamed of home ownership since middle school. She finally bought a home in Portland, Ore., this year. And in her long-delayed childhood dream, you can track the last decade of the housing market, not just in Portland but across the U.S. Murawski always knew exactly what kind of house she wanted, a Craftsman - that style with columns and exposed rafters on a big front porch. But right after she graduated from college, the Great Recession hit.
MURAWSKI: I worked in construction, so my wages weren't that great.
DOMONOSKE: She wanted to buy a house, but it wasn't happening.
MURAWSKI: I just felt really lucky to have a job throughout that entire time.
DOMONOSKE: There were a lot of people in her position. After the crash, they couldn't afford to take advantage of low home prices. Then as the economy improved, they all entered the market at once. There weren't enough houses to go around. The fierce competition kept Murawski from buying.
MURAWSKI: The market has just been climbing the whole time. It was really hard to decide if it was a bubble and I should wait or what I should do.
DOMONOSKE: The market was booming in cities across the country, but it was particularly intense in Portland. Rhonda Spencer is a real estate broker in Portland.
RHONDA SPENCER: Buyers were having to bid over the price of the home many times.
DOMONOSKE: But this summer, things shifted, she says.
SPENCER: We're not seeing as many competitive bids.
DOMONOSKE: The market was cooling in Portland and other pricey markets from LA to New York City. Prices are still steep, but the bidding wars are easing. And this summer was also when Murawski decided she was ready. She got a real estate agent, found a condo. It wasn't the Craftsman of her dreams, but she fell in love. After years and years of waiting, it all happened very fast.
MURAWSKI: It was maybe two weeks.
DOMONOSKE: From deciding to buy to having her offer accepted, there were no bidding wars to block her way. So why did the market change? Well, interest rates are the biggest driver. After a long, slow recovery, the Fed is raising rates, and mortgage rates are approaching 5 percent for the first time in years. That's a full percentage point higher than a year ago. Len Kiefer is a deputy chief economist at Freddie Mac.
LEN KIEFER: At a typical sort of mortgage size, that means about $150 a month in higher payments.
DOMONOSKE: But Kiefer wants to keep that in perspective.
KIEFER: Mortgage rates above 5 percent may seem very high. You know, over the last seven years, they have rarely been that high, but, historically, that is some of the lowest rates ever seen.
DOMONOSKE: There's another factor, he says. Prices were rising way faster than incomes, which isn't sustainable, he says. So you'd expect the market to adjust. Kiefer uses words like rebalancing, but not everyone is quite so sanguine.
PATRICK NEWPORT: So the housing market's in a slump. It's deteriorating, going to a temporary period of weakness.
DOMONOSKE: Patrick Newport is a U.S. economist at IHS Markit, a business information group. But Newport also emphasizes that the national housing market is not collapsing and the economy overall is very strong.
NEWPORT: The economy's doing so well right now that the rest of the economy can disguise what's happening in the housing market.
DOMONOSKE: And this isn't a crash. In fact, slowing sales might let prices stabilize and eventually draw people who have been sidelined into the market - people like Sarah Murawski, who's settling into her new reality.
MURAWSKI: This last weekend, the washer was off-kilter (laughter). Yeah, I just threw my fist in the air. And I was like homeownership, yay.
DOMONOSKE: Don't worry. She fixed the washer.
Camila Domonoske, NPR News.
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