After announcing another 0.75% hike to its benchmark interest rate on Wednesday amid the Federal Reserve’s fight with inflation, the Fed’s Chairman Jerome Powell said the U.S. housing market will likely go through a “difficult correction” before achieving “better balance.”

What does that mean?

Well, we’re already seeing it. Home price increases — in some regions more than others — are leveling off if not starting to dip.

“The deceleration in housing prices that we’re seeing should help bring sort of prices more closely in line with rents and other housing market fundamentals,” Powell told reporters Wednesday. “And that’s a good thing.”

But that doesn’t mean it won’t be painful.

“For the longer term, what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level, at a reasonable pace and that people can afford houses again,” Powell said. “So we probably, in the housing market, have to go through a correction to get back to that place.”

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Powell added: “From a sort of business cycle standpoint, this difficult correction should put the housing market back into better balance.”

What does a housing ‘correction’ mean for the West?

Powell’s language on Wednesday gave more insight into what Powell meant in June when he said the housing market needed a “reset.”

There’s been speculation about whether that has meant the Fed’s goal was to temper buyer demand to give a boost to inventory or if the Fed actually wants home price declines, Fortune reported Thursday, but in the minds of some housing analysts, Powell’s language this week strengthens the interpretation that the Fed’s intent is to bring home prices down.

What they’re saying: “Clearly the Fed’s shift in word choice from June’s ‘housing needs a reset’ to today’s ‘housing reset actually means a correction’ indicates they are quite fine with home prices falling, home sales cooling off, and construction pulling back significantly in order to achieve their mission,” Rick Palacios Jr., head of research at John Burns Real Estate Consulting, told Fortune.

The big picture: The COVID-19 pandemic sent the nation into a housing frenzy, shooting home prices to never-before-seen levels as mortgage rates lingered at times below 3%, fueling demand for not only sales, but refinancing.

Now, as mortgage rates have topped 6%, the party’s over. No longer are low mortgage rates masking the impacts these record high home prices have on affordability.

Now, the U.S. is reckoning with an affordability crisis that it can’t avoid. Enough would-be home buyers have hit their limit and have pulled back rapidly over the last several months that it’s had a dramatic impact on demand.

Home prices in Utah, Idaho: The impact has been swift and dramatic, especially in the West. Local housing markets including Boise, Idaho, and yes, Salt Lake City, which were among the cities to see home prices skyrocket amid the pandemic frenzy, are also now some of the first to see prices dip as the frenzy fizzles.

From May to August, the Boise metro area’s home values fell by 5.26%, and Salt Lake City’s fell by over 7%, according to Fortune’s analysis of Zillow’s Home Value Index.

U.S. housing slump is here to stay. What does that mean for Utah, the West?

The ‘chilling effect’ in Utah

On Thursday, the Salt Lake Board of Realtors took a closer look at just how much of an impact soaring mortgage rates have had on home sales and home prices in Salt Lake County.

Home prices in Salt Lake County: The single-family median home price in August was $601,000. Now, that’s still up over 10% year over year, from $545,000 in August of last year. But, that’s also down 7.5% from when they peaked at $650,000 in May, according to the Salt Lake Board of Realtors.

Let’s put that into further perspective. Single-family home prices in Salt Lake County increased a staggering 63% since the start of the pandemic, from March 2020 to May of 2022.

That’s a $250,000 increase in a matter of two years — up from $400,000 in March of 2020.

Now, those days of rapid price acceleration are over.

Chilling effect: “The Federal Reserve’s aggressive rate hikes seem to be having little effect on inflation, but a chilling effect on the housing market,” said Steve Perry, president of the Salt Lake Board of Realtors, in a prepared statement “We are selling about 400 fewer homes a month than the 10-year average.”

Home inventory on has topped 10,000 homes — a 150% increase over the slim, 4,000 active listings this time last year, when buyer competition was high and inventory was low. Now, inventory is reaching a more balanced level, according to the board.

“The bidding wars are over,” Perry said. “Offers above asking price and waiving of appraisals have ended. Home buyers have more choices and options when purchasing a house.”

Homes are also now taking much longer to sell. In August, the median number of days a home was on the market in Salt Lake County was 22 days, according to the board. That’s three times longer than it was a year ago, when the median days on market was just over seven.

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