The US housing market has just entered a tricky phase

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All right, Jay Powell, part of your plan seems to be working: fewer people are buying houses. But that doesn’t translate into lower prices — at least not yet.

Here’s the deal: again, for them millionth Month in a row, home prices in America hit an all-time high. The median price in June was $416,000, up 13.4% from the same month last year, my colleague Anna Bahney reports. These are… bananas.

At the same time, sales fell for the fifth straight month, around 14% less than a year ago.

Well, in simple economics (the only kind I know of), if prices get too high, that should dampen demand – which in turn should push prices down. But that takes time, especially when the market is as hot as it has been for the last two years.

Right now it is an awkward moment where neither buyer nor seller are so happy.

There are a few reasons for this:

  • Mortgage rates are double what they were a year ago. The 30-year standard fixed-rate mortgage was up 5.5% this week, up from 2.8% a year ago. Of course, this encourages potential buyers to wait and hope for a better offer.
  • Inventory levels have improved slightly but remain historically tight. Home builders are slowing new home construction and understandably wary of being caught out by a flood when a recession hits and craters are asking.
  • Sellers may have become too greedy by now. Think about it: how many neighbors or acquaintances do you know who have sold their house for double what they paid for it within days of listing it? This is the seller’s market that everyone expects.
  • Key quote: “Buyers can’t figure out what the right price is,” Mark Zandi, chief economist at Moody’s Analytics, told the Wall Street Journal. “Sellers are very reluctant to give up” the price they were expecting a few months ago.

Sales are likely to fall further as buyers are priced out by mortgage rates, which are being influenced by Federal Reserve interest rate policy. And it’s all but guaranteed that the Fed will continue to hike rates aggressively until this historically high inflation reverses course. (Tune in next Wednesday as we see what Jay Powell and his merry band of nerds have in store for us this time around…)

Despite this general decline in sales, there are still problems in certain markets. In Miami, for example, average home prices rose 40% year over year. (Homes in Orlando and Nashville are up nearly 31%.)


“A combination of higher prices and higher mortgage rates has clearly changed the dynamics in the housing market,” said Lawrence Yun, NAR’s chief economist. “Even those willing to buy are simply priced out.”

Although home sales have slowed back to the pace of 2019, the market remains surprisingly buoyant. The number of days a property is on the market before a deal is closed is the fastest ever at 14 days. (A year ago it was 17 days, and a more typical market saw properties on the market for almost 30 days.)

“Maybe the buyers are trying to take advantage of a lower fixed rate… They want to sign the contract and close the deal quickly,” Yun said.

But sellers should take note: This buoyant period in the market is unlikely to last, Yun said.

Macau’s casinos are bleeding cash under China’s strict Covid-19 lockdown orders. The former Portuguese colony-turned-gaming Mecca was already paralyzed by the drop in travel during the pandemic, and now analysts are predicting things are about to get even worse. Gross revenue from gambling is expected to fall by 98% this month compared to July 2019 – and that’s assuming casinos reopen next week.

Temperatures are scorching across Europe, but officials are already planning what could be a long, painful winter.

Here’s the deal: The European Union unveiled its emergency gas rationing plan on Wednesday, asking its 27 member states to cut gas demand by 15% and urge manufacturers to use alternative energy sources.

This is the moment of rationing that many Europeans feared would be when Russia invaded Ukraine in February.

Why now?

A key natural gas pipeline linking Russia with Germany has been shut down for routine maintenance over the past 10 days. And according to European officials, there’s a good chance the Russian state gas company will simply refuse to resume supplies tomorrow, when maintenance is due to be completed.

“Russia is blackmailing us. Russia uses energy as a weapon,” said EU Commission President Ursula von der Leyen.

This pipeline, dubbed Nord Stream 1, is a vital artery connecting Russia’s gas reserves to Europe via Germany. It supplies almost 40% of the block’s total pipeline imports from Russia, my colleague Anna Cooban writes.

Russia has already shown it is willing to arm its energy supply by cutting power to some countries because they refuse to pay their bills in rubles (which would violate European sanctions). And last month, Russia cut the pipeline’s flow by 60%, blaming Western sanctions.

President Vladimir Putin said this week that Russia will fulfill “all of its obligations” in supplying gas to Europe. But it’s Putin – no one knows what’s actually in store for him.

This uncertainty is a big part of the problem for Europe’s economy.

Look here:

  • Fears of power disruptions have pushed benchmark gas prices up about 85% since the invasion of Ukraine, according to the Intercontinental Exchange.
  • Prices rose 5% on Wednesday as the deadline for the pipeline to reopen drew near.
  • Like the United States and other developed countries, Europe is also struggling with rising inflation. And political upheavals. And climate change. And a noticeable shift towards economic recovery.
  • A European recession cannot be taken for granted. But “a sharp slump in growth is 100% certain,” my colleague Julia Horowitz writes.


Energy officials say Europe must find ways to save 12 billion cubic meters of gas – about 3% of its annual consumption – over the next 12 weeks to avert a disaster.

“It’s a big demand, but it doesn’t exaggerate the scale of what’s needed,” Fatih Birol, executive director of the International Energy Agency, said earlier this week.

“Relying solely on gas from non-Russian sources is categorically not enough – these supplies are simply not available in the quantities needed to replace missing supplies from Russia,” he added.

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