Oxford Economics warns the U.S. housing slowdown still has room to run, citing a double bind of "high prices, elevated mortgage rates" and rising construction costs that will keep both buyers and builders on the defensive through year‑end.

What Happened: "The supply of existing homes for sale is approaching pre‑pandemic levels as a combination of high prices, elevated mortgage rates, and concerns over the labor market keep buyers sidelined," economist Matthew Martin wrote in a note accessed by Fortune.

The note, titled ‘Recession Monitor – Real test for economy is just beginning,’ points to two key drags for the housing market. First, potential sellers will have less ability to pass along price increases, meaning many will simply pull listings rather than accept lower offers.

Second, builders face a cost squeeze as tariffs lift material prices and a tighter immigration policy shrinks the labor pool, slowing housing starts and keeping inventory lean.

"The new-home market is also being challenged, with builders continuing to offer incentives including price cuts in an effort to move unsold inventory," he wrote.

See Also: Kevin O’Leary Calls Trump’s No Tax On Home Sales Plan ‘Common Sense’: Shark Says, ‘Families Can Grow Without Getting Punished’

Realtor.com's May trends report shows active listings up 31.5% year‑over‑year, yet still 14% below 2019 levels. June data from the National Association of Realtors put supply at 1.53 million units, or 4.7 months of demand, which is well under the six‑month mark that signals a balanced market.

Why It Matters: Although the figures for active listings aren’t particularly low, a growing number of sellers are beginning to pull their listings as climbing borrowing costs threaten to squeeze the housing market even harder.

Earlier this month, Moody’s chief economist Mark Zandi warned that the U.S. housing market is flashing a “red flare,” with home sales at a low and builders pulling back due to high mortgage rates and rising costs. He predicted further weakness, including potential drops in home prices, new construction and completions.

A few weeks back, economist Craig Shapiro also called for a national housing policy overhaul, criticizing the sector as over-subsidized and under-scrutinized.

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