Since she was 12 years old, Sara Murawski has dreamed of buying a house. Specifically, a Craftsman home, with a big front porch.
But she graduated right before the Great Recession. When home values plummeted, she couldn't afford to take advantage of lower real estate prices. She was working in construction, with bachelor's degrees in housing studies and interior design.
"My wages weren't that great," she says. "I just felt really lucky to have a job."
By the time Murawski could save for a down payment, prices were increasing rapidly. She wasn't the only millennial who had delayed home-buying. Everyone was entering the market at once, and there weren't enough houses to go around. The fierce competition for homes drove prices up — and kept Murawski from wading in to the market.
Her experience was not unusual. In recent years, in the U.S. as a whole, home sales have been increasing, and housing prices have been rising more quickly than incomes. The trend is exaggerated in urban metropolitan areas from Los Angeles to New York City, including Portland.
Lawrence Yun, chief economist at the National Association of Realtors, says that homeowners were profiting from the booming market. "But for the renters and first-time buyers who want to participate in the American dream of ownership, it has become much more difficult, with prices rising too fast," he says.
Now, though, things have started to shift.
It's not that houses are becoming more affordable. In fact, as mortgage rates are rising, it's getting even more expensive to buy a home. But those rising rates are having an impact. The runaway housing market is starting to hit the brakes.
Home sales have been decreasing across the U.S. for several months. You can call that trend a slump, or a correction, depending on how you feel about it.
But it's not a crash. And, if the economy remains strong, the slowdown might be an opportunity for first-time buyers who have been sidelined by the booming market.
That's what happened to Murawski, in Portland. This summer, she saw the intense competition for homes was starting to cool. Prices were still high, but she wasn't willing to wait any longer.
"I had been watching the market ... . I've been following it pretty closely," she says. "I just felt like another opportunity might not come up for me."
Murawski took a day off work and called a real estate agent. Soon, she fell in love with a place — not the Craftsman house of her dreams, but a condo with an elevated patio and a view of the trees. She made an offer. And the next day, it was accepted. The seller even paid her closing costs.
It was fast, compared to what some homebuyers have gone through. She went from first looking at houses to having her offer accepted in about two weeks, she says. No bidding war required.
A 'more pronounced' version of national trends
Josh Lehner, an economist with the Oregon Office of Economic Analysis, says that Murawski's experience in Portland is representative of what's been happening across the country — except the rise in the city's real estate prices was more intense.
The growth trends in Portland over the last decade have been "supercharged, relative to the national trends," Lehner says. In part that's because of higher-than-average income growth. The pattern "is the exact same, it's just more pronounced," he says.
And the recent cooling started a little early in Portland. In September, as price growth was slowing in cities across the country, Oregon Live noted that "major metropolitan areas are following the pattern seen earlier in the Portland area."
Nationally, sales of both new and existing homes have been declining for the last four months, and homes are taking longer to sell. And while the prices of homes aren't declining yet, they've at least slowed to a more moderate rate of growth in cities where housing values had been skyrocketing.
Analysts say the biggest factor is the change in interest rates.
Average mortgage rates are approaching 5 percent. That's a full percentage point higher than they were a year ago.
"For a consumer, a typical homebuyer at a typical sort of mortgage size, that means about $150 a month in higher payments for the same price home," says Len Kiefer, deputy chief economist at Freddie Mac.
But he also wants to keep that increase in perspective.
"Mortgage rates above 5 percent may seem very high," Kiefer says. "You know, over the last seven years they have rarely been that high. ... But historically, [those are] some of the lowest rates ever seen."
And, like economist Lawrence Yun, Kiefer says that houses had just grown too expensive, too fast.
As for what happens next, analysts agree that affordability will continue to be a challenge for would-be homebuyers in major markets.
But if the economy remains strong and the housing supply increases, the slowdown in sales could eventually lead to prices rising at a more moderate, sustainable rate.
"Maybe the housing market has a good story over the next couple of years," Kiefer says, "if we can figure out a way to supply housing at an affordable price."
SCOTT SIMON, HOST:
The housing market is cooling. Sales of both new and existing homes are dropping. What does that mean for homebuyers and the overall economy?
NPR's Camila Domonoske explains.
CAMILA DOMONOSKE, BYLINE: This summer, Sara Murawski's real estate agent asked her how long she'd been looking at houses.
SARA MURAWSKI: I was like, you know, I've wanted a house since I was 12, but I actually started looking to buy around 21 (laughter).
DOMONOSKE: Murawski's 34, and she's serious. She dreamed of home ownership since middle school. She finally bought a home in Portland, Ore., this year. And in her long-delayed childhood dream, you can track the last decade of the housing market, not just in Portland but across the U.S. Murawski always knew exactly what kind of house she wanted, a Craftsman - that style with columns and exposed rafters on a big front porch. But right after she graduated from college, the Great Recession hit.
MURAWSKI: I worked in construction, so my wages weren't that great.
DOMONOSKE: She wanted to buy a house, but it wasn't happening.
MURAWSKI: I just felt really lucky to have a job throughout that entire time.
DOMONOSKE: There were a lot of people in her position. After the crash, they couldn't afford to take advantage of low home prices. Then as the economy improved, they all entered the market at once. There weren't enough houses to go around. The fierce competition kept Murawski from buying.
MURAWSKI: The market has just been climbing the whole time. It was really hard to decide if it was a bubble and I should wait or what I should do.
DOMONOSKE: The market was booming in cities across the country, but it was particularly intense in Portland. Rhonda Spencer is a real estate broker in Portland.
RHONDA SPENCER: Buyers were having to bid over the price of the home many times.
DOMONOSKE: But this summer, things shifted, she says.
SPENCER: We're not seeing as many competitive bids.
DOMONOSKE: The market was cooling in Portland and other pricey markets from LA to New York City. Prices are still steep, but the bidding wars are easing. And this summer was also when Murawski decided she was ready. She got a real estate agent, found a condo. It wasn't the Craftsman of her dreams, but she fell in love. After years and years of waiting, it all happened very fast.
MURAWSKI: It was maybe two weeks.
DOMONOSKE: From deciding to buy to having her offer accepted, there were no bidding wars to block her way. So why did the market change? Well, interest rates are the biggest driver. After a long, slow recovery, the Fed is raising rates, and mortgage rates are approaching 5 percent for the first time in years. That's a full percentage point higher than a year ago. Len Kiefer is a deputy chief economist at Freddie Mac.
LEN KIEFER: At a typical sort of mortgage size, that means about $150 a month in higher payments.
DOMONOSKE: But Kiefer wants to keep that in perspective.
KIEFER: Mortgage rates above 5 percent may seem very high. You know, over the last seven years, they have rarely been that high, but, historically, that is some of the lowest rates ever seen.
DOMONOSKE: There's another factor, he says. Prices were rising way faster than incomes, which isn't sustainable, he says. So you'd expect the market to adjust. Kiefer uses words like rebalancing, but not everyone is quite so sanguine.
PATRICK NEWPORT: So the housing market's in a slump. It's deteriorating, going to a temporary period of weakness.
DOMONOSKE: Patrick Newport is a U.S. economist at IHS Markit, a business information group. But Newport also emphasizes that the national housing market is not collapsing and the economy overall is very strong.
NEWPORT: The economy's doing so well right now that the rest of the economy can disguise what's happening in the housing market.
DOMONOSKE: And this isn't a crash. In fact, slowing sales might let prices stabilize and eventually draw people who have been sidelined into the market - people like Sarah Murawski, who's settling into her new reality.
MURAWSKI: This last weekend, the washer was off-kilter (laughter). Yeah, I just threw my fist in the air. And I was like homeownership, yay.
DOMONOSKE: Don't worry. She fixed the washer.
Camila Domonoske, NPR News. Transcript provided by NPR, Copyright NPR.