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2022 marked the end of cheap mortgages and now the housing market has turned icy cold

Children ride scooters past a house for sale in Los Angeles. Home sales have slowed as mortgage rates have climbed.
Allison Dinner
/
Getty Images
Children ride scooters past a house for sale in Los Angeles. Home sales have slowed as mortgage rates have climbed.

Evan Paul and his wife entered 2022 thinking it would be the year they would finally buy a home.

The couple — both scientists in the biotech industry — were ready to put roots down in Boston.

"We just kind of got to that place in our lives where we were financially very stable, we wanted to start having kids and we wanted to just kind of settle down," says Paul, 34.

This year did bring them a baby girl, but that home they dreamed of never materialized.

High home prices were the initial insurmountable hurdle. When the Pauls first started their search, low interest rates at the time had unleashed a buying frenzy in Boston, and they were relentlessly outbid.

"There'd be, you know, two dozen other offers and they'd all be $100,000 over asking," says Paul. "Any any time we tried to wait until the weekend for an open house, it was gone before we could even look at it."

Then came the Fed's persistent interest rates hikes. After a few months, with mortgage rates climbing, the Pauls could no longer afford the homes they'd been looking at.

"At first, we started lowering our expectations, looking for even smaller houses and even less ideal locations," says Paul, who eventually realized that the high mortgage rates were pricing his family out again.

"The anxiety just caught up to me and we just decided to call it quits and hold off."

Buyers and sellers put plans on ice

The sharp increase in mortgage rates has cast a chill on the housing market. Many buyers have paused their search; they can longer afford home prices they were considering a year ago. Sellers are also wary of listing their homes because of the high mortgage rates that would loom over their next purchase.

"People are stuck," says Lawrence Yun, chief economist with the National Association of Realtors.

Yun and others describe the market as frozen, one in which home sales activity has declined for 10 months straight, according to NAR. It's the longest streak of declines since the group started tracking sales in the late 1990s.

"The sellers aren't putting their houses on the market and the buyers that are out there, certainly the power of their dollar has changed with rising interest rates, so there is a little bit of a standoff," says Susan Horowitz, a New Jersey-based real estate agent.

Interestingly, the standoff hasn't had much impact on prices.

Home prices have remained mostly high despite the slump in sales activity because inventory has remained low. The inventory of unsold existing homes fell for a fourth consecutive month in November to 1.14 million.

"Anything that comes on the market is the one salmon running up stream and every bear has just woken up from hibernation," says Horowitz.

But even that trend is beginning to crack in some markets.

At an open house for a charming starter home in Hollywood one recent weekend, agent Elijah Shin didn't see many people swing through like he did a year ago.

"A year ago, this probably would've already sold," he says. "This home will sell, too. It's just going to take a little bit longer."

Or a lot longer.

The cottage first went on the market back in August. Four months later, it's still waiting for an offer.

Copyright 2023 NPR. To see more, visit https://www.npr.org.

Arezou Rezvani is a senior editor for NPR's Morning Edition and founding editor of Up First, NPR's daily news podcast.