Sky-high housing prices still threaten to complicate the Federal Reserve’s inflation fight, even as America’s market for single-family homes shows signs of cooling in response to sharply higher interest rates. This week, Redfin reported the number of “stale” home listings climbed above 60% in July, reflecting the year’s surge in mortgage rates and concerns about the economy as homes linger on the market for longer.
With the central bank’s easy-money stance credited with helping home prices shoot roughly 20% higher annually, it makes sense that worries have emerged about a potential sharp correction in housing prices, one that could ripple through the economy. Except, borrowers already took out trillions worth of low-cost, 30-year fixed-rate mortgage debt in recent years, leaving only about 10% of the $12.8 trillion mortgage market at adjustable rates, according to the Urban Institute. That’s good for existing homeowners, since it dulls the kind of interest-rate shocks that sparked a wave of subprime mortgage defaults from 2007 to 2009, causing home prices to plunge and exposing reckless leverage in financial markets that spiraled into a global crisis. “This is a different kind of borrower,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management, adding that she continues to invest in U.S. mortgage bonds, given higher underwriting standards in place over the past decade, plus meatier returns of late. “I’m a little insensitive to a consensus view th …