AMERICA´S HOUSING MARKET IS SHUDDERING / THE ECONOMIST

Stone cold Austin

America’s housing market is shuddering

For the country’s homeowners, the good times are coming to an end

An aerial view of a residential neighborhood in Austin, Texas, USA - grey rooves, white driveways and green lawns./Photograph: Getty Images

Few pandemic-era bets will have paid off quite as nicely as nabbing a house in a boomtown such as Atlanta, Austin or Miami with a two-point-something-per-cent mortgage rate—and holding on as its value soared in the subsequent years. 

People wanted sun, space and an escape from covid killjoys. 

These cities offered it.

Now, though, the good times are coming to an end. America’s housing market is flagging. 

Across the country, prices have drifted down in the first half of the year, with most cities seeing falls in the past three months (see chart 1). 

Tight monetary policy has kept interest rates high. 

And this is feeding through to the property market, just as President Donald Trump’s tariffs are chipping away at the economic growth that had been keeping sales strong.

Prices are still creeping up in the north-east and the mid-west, but the west and, in particular, the south are hurting (see map). 

Pity the homeowner in Dallas or Phoenix who bought last year. 

They are carrying a beefy mortgage rate of 7% or so and the value of their house is already down a few percentage points in nominal terms, or more after accounting for inflation.

Such cities face a number of difficulties. 

Fewer Americans are moving to the sunbelt than during the pandemic, when internal migration jumped (see chart 2). 

Mr Trump’s border crackdown may be making a difference, too, by reducing international arrivals. 

Housebuilding boomed in these cities when demand was high and rates were low. 

Although it has slowed, many covid-era constructions are only just hitting the market. 

Worse, public perception of the cities has changed. 

Austin and Miami failed to attract enough superstar firms when they were in favour; few tech bros today tout them as the new Silicon Valley.

For similar reasons, some of the worst-performing markets in the north-east are holiday towns. 

Prices are falling in Nantucket and Martha’s Vineyard and on the coast of Maine. 

Big-city suburbs, another pandemic winner, do seem to be faring better—whereas dialling into Zoom from the beach house doesn’t quite work, hybrid work schedules perhaps make adding 15 or 30 minutes to the commute viable.

The state that fares worst of all combines these trends and adds a few peculiarities of its own. 

It is Florida, where prices have fallen by 4% in the past year. 

Aziz Sunderji, an independent analyst, points to high and rising home-insurance premiums owing to climate change ($11,000 or so a year in Florida, versus $2,400 nationwide). 

Other reasons are a sharp drop-off in demand from rich Canadians (a surprising number of whom flee cold winters to Florida) and expensive new safety rules that came in after a condominium in Surfside, a Miami suburb, collapsed in 2021.

What does the market say about America’s economy? 

Historically, housing has been one of the most interest-rate-sensitive sectors; buyers lever up to make purchases, and are less likely to do so when borrowing is expensive, dampening sales and construction. 

The industry both helps drive economic growth—housing employs lots of people and homes are a slug of families’ wealth—and is worth watching to see where the economy is heading.

The current slowdown is partly deliberate: the Fed is keeping policy tight to squeeze out the last of America’s above-target inflation. 

Other parts of the economy are cooling, too: real private consumption and investment rose at an annualised rate of just 1.2% in the second quarter of 2025, having run at or above 2% for most of the past few years.

Yet relief for the housing market, in the form of much looser monetary policy, may not be on the horizon (even if the Fed does look likely to lower rates a bit in the months ahead). 

Tariffs have complicated the job for policymakers, as they may cause inflation to spike. 

At the same time, a colossal build-out of artificial-intelligence infrastructure, data centres and the like is helping buoy growth. 

Capital spending by the “magnificent seven” big technology companies now accounts for over 1% of GDP, and has near doubled in just a few years, according to Renaissance Macro Research, reducing the need to stimulate the economy. 

The past decade has been very kind to America’s homeowners. 

Perhaps aspiring buyers are due a break.