Why this tightening cycle is so brutal for the US housing market

The US Federal Reserve’s efforts to rein in inflation are hitting the US housing market hard: Last month, employment in residential building fell 4.5%. In May, the number of permits for new homes fell 7%, and new homes started fell 14%.

Arguably, that’s too hard. As the Fed started hiking in March, the average cost of borrowing to purchase a home with a 30-year fixed-rate mortgage was already rising, but it shot up to 5.8% by June. Now, it has fallen slightly to 5.3%.

At the recent peak in the federal funds rate, 2.4% in 2019, mortgage rates didn’t break 5%. Today, the Fed is paying banks 1.2% on their deposits. The last time housing credit was so expensive was when the housing bubble popped in 2008.

Read the rest of this story on qz.com. Become a member to get unlimited access to Quartz’s journalism.