Yes, and the reason is abundantly clear: higher borrowing costs. In its effort to suppress the highest inflation in four decades, the Federal Reserve has been ratcheting interest rates higher since March of 2022, and that has caused a precipitous increase in mortgage rates. At the end of 2021, the average rate on a 30-year fixed rate mortgage was 3.11%, according to Freddie Mac. As of early November, that average had risen to 7.08%, though it’s since fallen to just below 7%. Put another way, the monthly payment on a $300,000 home at current rates is the same as the monthly payment on a $475,000 home at the average rate that prevailed at 2022’s onset.

Home prices have yet to adjust to higher borrowing costs and remain at a level reflective of sub 3% mortgage rates and booming demand. The S&P/Case-Shiller Home Price Index, a measure of the price level of existing single-family homes in the U.S., increased 41 between the start of 2020 and September 2022 and has risen 8% through the first nine months of the year. According to Census Bureau data, the median price of a new house sold increased from $331,800 in February 2020, the month before the pandemic began, to $493,000 in October 2022.

The result of still-high prices and elevated borrowing costs has been a complete collapse in market activity. Sales of existing homes have fallen in each of the past nine months, and there were 28% fewer homes sold in October 2022 than in October 2021, according to the National Association of Realtors. Monthly new home sales have fallen 39% since peaking in August 2020 and, as of October 2022, have fallen back below pre-pandemic levels.

The downturn has been particularly sharp in the single-family segment, as many would-be buyers are now priced out of owner occupancy. Authorizations for new single-family construction fell 22% during the year ending October 2022, a month that saw the fewest single-family housing starts since May 2020.