Real Estate


U.S. homeowners have lost a staggering $2.3 trillion in market value since June as higher interest rates drive down demand in the formerly red-hot housing market, and many economists predict the decline will continue throughout the year, as mortgage costs remain elevated and keep sidelining potential buyers.

Key Facts

The total value of U.S. homes has fallen from a record high of $47.7 trillion in June to about $45.3 trillion at the end of last year—representing the largest June-to-December drop since the subprime mortgage crisis was unraveling in 2008, real estate brokerage Redfin reported Wednesday.

Though home prices are up about 1.5% over the past year, the median price has fallen about 11.5% from a peak of $433,133 in May to $383,249 in January, as higher mortgage rates (fueled by the Federal Reserve’s inflation-fighting policy) drive up borrowing costs and sideline potential homebuyers; last week, U.S. home purchase applications fell to a 28-year low.

Hardest hit areas include regions adversely affected by waves of technology layoffs and skyrocketing prices during the pandemic, including San Francisco (where home prices fell nearly 7% year over year), Oakland (down 4.5%) and New York (down 1%).

“The housing market has shed some of its value, but most homeowners will still reap big rewards from the pandemic housing boom,” says Redfin economist Chen Zhao, noting the total value of homes remains about $13 trillion higher than in February 2020—before the pandemic abruptly tanked the economy.

Nevertheless, prices are likely to only fall further: “The big story for 2023 will be the speed and extent” to which the decline in prices follows suit with the collapse in existing home sales, which have plummeted nearly 40% from their pandemic peak, says Pantheon Macro economist Kieran Clancy.

Pantheon ultimately projects home prices will fall by about 20% from their peak by the end of this year, suggesting the median price could tumble another 10% to about $346,500, per Redfin’s data.


Some economists are slightly more optimistic prices will hold up more. Comerica Economics forecasts housing prices will continue to fall “modestly” through the end of this year, ultimately pushing average prices down up to 9% on a national basis.

Key Background

Though low mortgage rates and historically high savings sparked a housing market boom during the pandemic, the Fed’s rate hikes ushered in an abrupt collapse in housing demand that only recently started to stabilize. Existing-home sales plummeted by nearly 18% last year to about 5 million, but they were down just 0.7% in January, according to the National Association of Realtors. “The downturn in sales is coming to an end . . . but a sustained recovery is a long way off,” says Pantheon Macro’s Kieran Clancy.

Further Reading

Housing Market Slows Again As Hot Inflation Drives Up Mortgage Rates—Here’s What That Means For Buyers (Forbes)

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