America’s frozen housing market takes no holidays

Most Labor Day BBQs won't be happening in the yards of new homeowners. [Bloomberg]( This is the Theme of the Week edition of [Bloomberg Opinion Today](, a digest of our top commentary published every Sunday. New subscribers to the newsletter can [sign up here](. Normally, Labor Day weekend marks the end of home shopping season. But can it even claim to do that if we didn’t really have a season to begin with? “It’s weird to say but appears to be true — what the resale housing market really needs is a slower economy,” Conor Sen [admits](. For a while there, people had hoped that peak inflation would take the housing market out of hibernation, but that hasn't happened. “A homebuyer on a $3,000 monthly housing budget has lost [$71,000 in purchasing power]( over the past year in large part due to the rise in mortgage rates,” Conor writes. The key to unfreezing the housing market is to have interest rates fall, and the only way for that to happen is to have economic growth slow. That, of course, comes with its own set of painful side effects. One side effect would be consumers weighed down by debts they can’t afford to pay off. US households have accumulated [$1 trillion in credit card debt](, and while some [economists]( look at that datapoint and wonder whether consumers are at their wits end, Karl Smith [says]( there’s no need to worry just yet. The job market is still strong, and Americans were able to build up sizable [cash buffers]( during Covid. Still, the Fed is responsible for figuring out if and when those household savings run out. “New research from Federal Reserve Bank of San Francisco economists [Hamza Abdelrahman]( and [Luiz Oliveira]( concludes [it’s happening now](,” Claudia Sahm [writes](. Savings appear to have peaked in the summer of 2021 at $2 trillion and have fallen steadily ever since. “But it's a mistake to think of excess savings as just more money sitting in the bank; it is also about having less debt,” Claudia explains. That’s why the Fed should be keeping track of debt separately. In the event that the Fed decides to tighten further, “the housing affordability problem could get worse,” Aaron Brown [says](. Unless the economy lets up a little, Erin Lowry [argues](, “millennials have little choice but to compromise — either by giving up on homeownership or facing the reality of being able to afford less than what’s desirable.” Unfortunately, that might mean having a backyard that’s not large enough to host a big Labor Day BBQ.  What We’re Watching: [Global Authoritarians Are Overwhelming Democracy for a Reason]( According to the latest [Latinobarómetro]( poll, less than half of Latin Americans consider democracy to be the preferable form of government. Even more alarming, 54% of people said they wouldn’t mind another form of government coming into power if it helped solve their nation's problems – which is up 10 percentage points since 2010. This shift in thinking is [especially dangerous]( as populist leaders like President Nayib Bukele, the mastermind behind El Salvador’s mass incarceration policy (and human rights crisis), are gaining popularity. Eduardo Porter [examined]( the new face of authoritarianism and why it is having a resurgence. Notes: Please send sharpened s’mores sticks and feedback to Jessica Karl at jkarl9@bloomberg.net and follow us on [Instagram](, [TikTok](, [Twitter](, [Threads]( and [Facebook](. Follow Us You received this message because you are subscribed to Bloomberg's Opinion Today newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](