Get All Access for $5/mo

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.

Editor's Pick

Science & Technology

5 Rule-Bending AI Hacks to Make Your Mornings More Productive and Profitable

By 2025, AI will transform productivity by streamlining workflows and cutting costs. Major companies like Microsoft, Google, and OpenAI are leading the way, advancing AI into "Phase 3," where tools act as digital assistants. Discover 5 AI hacks to boost efficiency and redefine your daily routine.

Business News

Former Steve Jobs Intern Says This Is How He Would Have Approached AI

The former intern is now the CEO of AI and data company DataStax.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Marketing

5 Critical Mistakes to Avoid When Giving a Presentation

Are you tired of enduring dull presentations? Over the years, I have compiled a list of common presentation mistakes and how to avoid them. Here are my top five tips.