Fed Chair Jerome Powell made it crystal clear last summer: Spiking mortgage rates would help to "reset" the U.S. housing market, which had turned into a buyer's nightmare during the pandemic.
Of course, spiking mortgage rates wouldn't magically build more homes. However, higher rates in theory could "rebalance" the U.S. housing market by throwing cold water on the pandemic's housing demand boom, allowing inventory breathing room to rise, and pushing home prices lower. That's also exactly what unfolded in the second half of last year: Sales for both new and existing homes went into free-fall mode, while U.S. home prices started to fall for the first time since 2012.
