Source: Fortune — 

When a buttoned-up Fed economist says the U.S. housing market has entered into a “difficult [housing correction”], it’d be wise to believe them. When it comes from the lips of Fed Chair Jerome Powell, it’s more of a warning.

Powell is right: Not only does housing activity continue to plummet, but U.S. home prices are falling for the first-time since 2012.

Unlike the 2000s housing correction, which saw U.S. home prices fall 27% between 2006 and 2012, this ongoing housing correction isn’t underpinned by bad loans nor by a supply glut. Instead, this correction is driven by what Fortune calls “pressurized affordability.” The Pandemic Housing Boom‘s 43% run-up in U.S. home prices combined with spiking mortgage rates has simply pushed affordability beyond what many borrowers can stomach.

The only levers available to depressurize affordability are for either mortgage rates or home prices to fall. In recent months, we’ve seen the latter.

“Home prices continue to face significant pressure in light of surging costs of borrowing,” Selma Hepp, deputy chief economist at CoreLogic, tells Fortune. “[The] considerable pullback in home buyer demand will continue to weigh home prices down, bringing them closer in line with local incomes.”