The real-estate market has been totally unhinged from reality for years. KevinTDugan reports on why buyers now are paying historically high prices for homes
Photo-Illustration: Intelligencer; Photo: Getty Images Oh, you want to buy a house? The bad news is that right now, you would pay a historically high price for a home, and as of today, you’d also hand over more money in interest for the privilege to do so — a whopping 5 percent, on average.
So what’s going on? For anyone who mistakenly believes that the economy is in bad shape, the real-estate market is a looking glass into the financial situation of the U.S. and whether things are bad or just feel bad. Housing is a giant part of the U.S. economy — more than 16 percent of GDP, according to a congressional research report last year — and is directly connected to the historically rapid rebound in employment and wages.
On Tuesday, though, the Fed appeared to be ready to hit the brakes faster than anyone realized. Fed governor Lael Brainard said the Fed would soon “rapidly” reverse its pandemic-era debt-buying program, when it bought trillions in debt to keep the economy afloat, and start selling government and corporate bonds back into the market as soon as next month — essentially pushing risk back onto investors.
This is supposed to discourage people from buying homes. The thing about the real-estate market is that it has been crazy — as in, deranged and totally unhinged from reality — for years. Daryl Fairweather, the chief economist at real-estate site RedFin, noted to me that there are still plenty of buyers who don’t care what the mortgage rate is because they’re coming in from other areas or as investors, or they can pay for a property with cash.
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