Is a Housing Market Correction Finally Underway? Experts are saying the market is still "a bit rough right now," and may get worse before it gets better.

By Amanda Breen

It's been a tough couple of years for buyers in the housing market — and things may get worse before they get better.

Redfin's Chief Economist Daryl Fairweather told Fortune that a housing market correction is already underway and that higher interest rates are helping to restore some equilibrium to the market. But the possibility of a recession is throwing the correction's longevity into question, and higher interest rates also mean it's more expensive to build — which prevents a much-needed increase in housing inventory.

Related: Housing Market Layoffs: Compass, Redfin Layoffs Explained

"It's now almost 30% more expensive to buy a home [than it] was just a year ago, so that's certainly slowing down demand," Fairweather told Fortune. "Also, home sellers don't need to participate in this market. They got record equity last year because of the increase in home values."

States in the Western U.S. like Washington and California have seen the biggest drop in home prices so far. In Tacoma, Wash., nearly 50% of available homes have cut prices, while in Sacramento, Calif., that number is 44%. The median listing prices for homes were $475,000 and $495,000, respectively, as of April 2022.

Fairweather warned that a continuing correction to the housing market depends on other variables, including a potential recession and high building costs, stressing that the market is still "a bit rough right now," and that it may continue to be.

Increasing the available housing inventory isn't a cure-all for the boom either. Earlier this year, real estate agent Dana Bull of Sotheby's International Realty told CNBC that although inventory is on the rise, "buyers are still coming out of the woodwork and committed to landing homes, so new inventory and new demand seem to be increasing in lockstep."

Related: 5 Amazing Tips on Turning Real Estate Into a Real Fortune

Even before the pandemic, 2020 was expected to be a hot year for the housing market, as more millennials reached what is considered a "homebuying age." But the rise in remote work led to increased demand for suburban properties and turned what was supposed to be a "hot year" into a scorcher.

With rising interest rates meaning fewer home sales, real estate brokerages are also feeling the strain: Last month, Compass and Redfin announced they'd be slashing their workforces, by 10% and 8%, respectively, for a total of more than 400 employees per company.

Amanda Breen

Entrepreneur Staff

Senior Features Writer

Amanda Breen is a senior features writer at Entrepreneur.com. She is a graduate of Barnard College and received an MFA in writing at Columbia University, where she was a news fellow for the School of the Arts.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

This Couple Started a Side Hustle to Improve a 'Terribly Made' Bathroom Essential. Now the Business Earns More Than $3 Million a Year.

Michael Fine and Lisa Schulner-Fine launched lifestyle brand Quiet Town in 2016 and have been growing it ever since.

Business News

What's Open on Easter Sunday? Costco and Target Will Close, But One Major Retailer Will Be Open. Here's What To Know.

The stock market was closed for Good Friday on April 18. Here's what's closed for Easter Sunday, April 20.

Business News

'Fully Replacing People': A Tech Investor Says These Two Professions Should Be the Most Wary of AI Taking Their Jobs

AI might replace jobs, but it also has the potential to help start new companies.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Growing a Business

How to Avoid the Perils of Short-Term Thinking For Long-Term Success

Too often, leaders go with the option that sounds most appealing right now. Here's why that's a mistake.