The Fed raises alarm over 'deterioration' in the US housing market — here's what that means for hopeful buyers

Core Insights - The U.S. housing market is experiencing a slump, with the Federal Reserve noting slow economic growth attributed to declining residential investment [1][2] - Housing demand is weakening, leading to an increase in available homes and a decrease in house prices [1][2] Market Data - Existing-home sales increased by only 0.8% year over year in July, while inventory rose by 15.4%, indicating a slackening market [3] - The months' supply of homes increased from 4.0 to 4.6, and new-home sales fell year over year, with the months' supply rate rising to 9.2 months from 7.9 months [3] Homebuilding Industry - The homebuilding industry is showing signs of caution, which may worsen the U.S. undersupply problem as the economics of new construction and lack of buyer demand create a negative cycle [4] Borrowing Rates Impact - High mortgage rates are affecting housing affordability, and many homeowners are "locked in" to low rates from the pandemic, complicating the supply issue [5] - Fed research indicates that nearly half of the drop in consumer mobility from 2021 to 2022 is due to the mortgage rate lock-in effect [5] First-Time Buyers - First-time buyers are particularly affected by higher mortgage rates, which disproportionately reduce home purchases among lower-income households, delaying homeownership aspirations [6]