The US Housing Market: Cooling Prices and Falling Mortgage Rates, but Challenges Remain for Buyers

The US housing market has been experiencing a number of shifts in recent months, with home prices cooling off and mortgage rates falling. While this may seem like good news for buyers, the recent closures of several banks could continue to make it difficult for some Americans to purchase homes.[0] Despite this, higher mortgage rates have helped to cool buyer demand and reduce bidding wars, which have the potential to drive home prices way up. Sellers may still be receiving multiple offers on their homes, but to a lesser degree than they were in 2021 or early 2022.[1] Additionally, sellers may be more open to making concessions these days than a year ago, such as making repairs or offering discounts in lieu of requested repairs.[1]

The National Association of Realtors survey reveals that the median home prices witnessed a decline of 0.2% between February 2022 and February 2023. The index has now fallen by 3% since it reached its all-time high in June.[2] For the first time since 2012, home prices experienced a year-over-year decline in February 2023, with the average prices being lower than those in February 2022. Existing home prices fell 12% to $363,000 in February from $413,800 last June, amid surging mortgage rates.[3]

The housing price drop will be determined by several factors, including the willingness of sellers to lower their prices, the Fed rate policy moving forward, and the number of qualified homebuyers willing to buy at today’s prices. While some parts of the country may see sales and price growth, particularly in locations where home prices have remained affordable over the past few years in relation to median income, the supply of homes for sale remains at about half of what would represent a balanced, “healthy” market. “Inventory numbers are higher than they were a year ago, but new listings are actually lower,” says Rick Sharga, executive vice president of market intelligence at ATTOM Data.[4] The reason for the inventory increase is due to a delay in selling listed homes, as there are fewer new listings available in the market.[4]

Several factors are causing home prices to drop, from an increase in mortgage rates to the recent run-up in housing prices over the past few years, the market is finally cooling off. However, even as home price growth slows and sales transactions increase, some experts remain cautiously optimistic that the housing market is in recovery. National Association of Realtors senior economist Nadia Evangelou predicts a housing rebound in 2024.[5] Although mortgage rates remain high, there is still more demand for housing than supply. There are indications that more prospective home buyers are re-entering the market, as mortgage applications have surged by 3% in the past week, and pending home sales have increased by 0.8% in February, surpassing the anticipated decline of 2.3%.[5]

According to Selma Hepp, Chief Economist at CoreLogic, the surge in home sales observed in January and February may be attributed to the pent-up demand from buyers, which was stimulated by the reduced mortgage rates. CoreLogic provides property, financial, and business intelligence. She stated that there were two sides to this coin.[6] “One is that we may see a more favorable mortgage rate during the spring home-buying season and into summer, but on the flip side, there may be some concern around the lack of mortgage lending. The mortgage lending that does end up occurring would be to very prime borrowers that have very strong credit, large down payments, and things like that.”[7]

While the US housing market is currently rebalancing, with the possibility of “maybe over-shooting on a downside,” credit availability will likely remain a concern, and there are things the Fed could do to address it.[7] Overall, the housing market may still experience some volatility in the coming months, but there are signs of a potential rebound on the horizon.

0. “Mortgage rates are stabilizing but that may not be enough to help house hunters” Manhattan Mercury, 5 Apr. 2023,

1. “Home Price Gains Are Slowing, but Here's Why Buyers Shouldn't Celebrate Just Yet” The Motley Fool, 2 Apr. 2023,

2. “US housing cools further, with prices down 3% from the peak –”, 1 Apr. 2023,

3. “US Housing Market in Trouble: Moody's Predicts Home Prices Will Fall in 2023 and 2024”, 3 Apr. 2023,

4. “2023 second-quarter housing trends: Uncertainty prevails | Business |” Brunswick News, 6 Apr. 2023,

5. “Home prices will fall 15% over the next year as high interest rates squeeze the housing market, economist says” Business Insider Africa, 29 Mar. 2023,

6. “Mortgage rates are stabilizing but that may not be enough to help house hunters” Hiawatha World, 5 Apr. 2023,

7. “Mortgage rates are stabilizing, but that may not be enough to help house hunters” Royal Examiner, 6 Apr. 2023,

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