A Chill Creeps Into The U.S. Housing Market

Recent data presage what could be the broadest slowdown in years

- Prashant Gopal and Sho Chandra

They were fed up with Seattle’s bidding wars. The couple were only in their late 20s but had already lost battles for two homes and were ready to renew with their landlord. Then, in May, their agent called.

Suddenly, sellers were getting jumpy, Shoshana Godwin, a broker with Redfin Corp., told them. Homes that should have vanished in days were sitting on the market for weeks. There was a threebedroom fixer-upper just north of the city going for $550,000, down from more than $600,000. They made an offer in early June and closed by the end of the month, at the asking price.

The U.S. housing market—particularly in highly competitive areas such as Seattle, Silicon Valley, and Austin—appears headed for the broadest slowdown in years. Buyers are getting squeezed by the combination of rising mortgage rates and prices that have been climbing about twice as fast as incomes. “This could be the very beginning of a turning point,” says Robert Shiller, a Nobel Prize-winning economist who’s famed for having spotted last decade’s housing bubble, though he isn’t yet ready to make that call this time around.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, is less circumspect. “The rate of home sales, new and existing, has probably peaked,” he says. “But it’s not going to roll over. It will gently decline.”