The housing market is weird. Sales are slowing, and home builders are calling it a recession. Prices stayed high, but are now starting to buckle. The figure is the Case-Schiller index, it tracks US home prices. They grew at an unprecedented rate during the pandemic when the Fed's QE program aimed to bring mortgage spreads down. It may have worked too well, 30 year mortgages rates fell below 3%, prices boomed, and the Fed kept on buying Mortgage Backed Securities. Now it has a multi trillion dollar mortgage portfolio. This may distort the housing market for years to come. Homeowners are less leveraged than they were going into 2008, so odds are there will not be a big crash or crisis. But the market may be less liquid and spreads could be higher for years to come.

Source: FRED

Allison Schrager is a senior fellow at the Manhattan Institute. Follow her on Twitter here.