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Federal environmental statutes and regulations govern many matters for which the costs and consequences of environmental policy decisions are localized. The argument for federal primacy in such matters is quite weak. Where the costs and benefits of environmental policy choices are known and confined to a given political jurisdiction, there is little reason to believe that transferring responsibility for making such choices to Washington, D.C. will produce systematically better results. Indeed, given the wide geographic, environmental, economic, and political variations across the country, there are many reasons to suspect that federal policy decisions concerning localized problems will actually be worse than those made by state and local officials. Localized knowledge is difficult to accumulate and deploy from a centralized administrative agency. Regional differences mean that federal policies will often fail to account for local particulars. As a consequence, uniform policies are likely to be over-protective in some areas, and under-protective in others. A policy that effectively reduces air pollution in one part of the country, such as New York City or Atlanta, may not work as well in parts of the country with different mixes of pollution sources, different topography, and a different climate. Further, the likelihood that “one size fits all” federal policies operate as “one size fits nobody” will only increase over time, as environmental measures experience diminishing marginal returns and regional variation becomes more important on the margin.

Federal systems of governance have the capacity to be robust— meaning that despite internal and external changing circumstances, they can continue to produce the benefits of a decentralized but inter- nally coordinated polity. Whether or not a federal system is robust is a function of its institutional design and federal culture. The American federal system, distributing authority between levels of government, has been remarkably resilient, failing only once during the past two centuries. Its resilience surprises many who keep expecting it to wither away as the national government grows. In this chapter I make two contributions. In the first part, I review the claims of the Ameri- can federation's inherent centralization and suggest the evidence as well as institutional and cultural reasons why federalism may still be meaningful in the American context. Second, I present the science of federal robustness: its key is its adaptability, provided by a set of safeguards that jointly protect federalism's boundaries while permitting experimentation around the edges. Future progress in the study of federalism obliges us to move beyond the standard equlibrium-based analysis to take a more dynamic view of federal system design and operation.

When it comes to fixing the broken politics of global warming, all eyes tend to focus on the global stage and on national policies. After all, climate change is a global phenomenon and emissions in one part of the world contribute to warming everywhere. But in the United States, sub-national governments are responsible for most of the progress in the climate change arena, despite the lack of an obvious rationale for them to reduce emissions whose benefits will spread well beyond their borders. Thirty-five states have stepped in to fill the void left by federal inaction, adopting plans to curb emissions even though the benefits of those reductions will be shared widely.

These state-level actions are important for a variety of reasons. First, they bring real and meaningful reductions in greenhouse gas emissions. Perhaps more significantly, they have several key implications for national climate policymaking. These actions point to a rationale for national action and to policy solutions that can attract political support. Further, in the United States, state lawmakers and administrators implement and enforce national air pollution control programs. Thus, state-federal cooperation is crucial for successful program implementation. Finally, the Clean Air Act amendments have passed only when lawmakers accommodated state and regional economic and political considerations.

{mosads}But the Senate’s failure here is also indicative of a deeper problem — a problem that has gone ignored by both parties for far too long. The fact that the process has proven so challenging shows us that the federal government is struggling to deal with something it was never intended to deal with in the first place.

Republicans and Democrats have both forgotten one of the most basic principles of our government, namely, the principle of federalism, which reserves all powers not given to the federal government in the Constitution to the states and the people.

For Bulman-Pozen, the states are already dead as autonomous independent actors: "[W]e should think more seriously about federalism's afterlife as a form of nationalism." For Gerken, "the federal government can increase its power by devolving it"; the task of federalism now is to expand the list of nationalist ends served by federalism and identify new institutional means for achieving those ends. For Abbe Gluck, federalism "mostly comes — and goes — at Congress's pleasure"; National Federalism goes beyond process federalism because it embraces "Congress as federalism's primary source."

The National Federalists have done the country a signal service by dispelling the myth that any of the variants of process or cooperative federalism can possibly coexist with the state's dual sovereignty when Congress decrees otherwise. They are surely correct, and the Supreme Court will hopefully soon take note that nobody on the right or left takes its affirmations of devotion to dual sovereignty seriously anymore.

Maria Rios, 75, has worked as a food prep worker with contractor HMS Host at Phoenix Sky Harbor international airport for 17 years, where she makes $14.50 an hour. Her husband, who is retired, only receives about $400 a month in social security benefits. Rios would like to retire also, but she doesn’t have the option even as she is battling ovarian cancer.

An average of 65 million Americans receive a monthly social security benefit, with majority of payments going to retired workers and their dependents.

Columbus, OH – After decades of planning, investors close to retirement age are delaying their retirement plans in light of today’s rising inflation, high interest rates and unstable economic environment, according to Nationwide’s eighth annual Advisor Authority survey, powered by the Nationwide Retirement Institute. A quarter (25%) of pre-retirees – defined as non-retired investors aged 55-65 – are planning to retire later than expected, and another 15% are unsure if they will ever retire.

In today’s landscape, pre-retirees are in a unique and challenging position. Although a number of factors are contributing to their decision to delay retirement, the majority (60%) said inflation poses the greatest immediate challenge to their retirement portfolio over the next 12 months. An economic recession (46%), market volatility (36%) and taxes (23%) are also factors that pose immediate challenges to their retirement portfolio.

We still have gold and silver, and we still have large reserves of them. In fact, the reserves of both are actually much bigger than in 1972, despite almost half a century of additional consumption. Known global reserves of gold are almost 400 percent larger today than in 1972, and silver reserves are more than 200 percent larger. And it's probably not too early to say that we're not going to run out of copper, aluminum, and petroleum as quickly as estimated in The Limits to Growth. Known reserves of all are much larger than they were when the book was published. Known aluminum reserves are almost twenty-five times what they were in the early 1970s.

How could these predictions about resource availability, which were taken seriously when they were released, have been so wrong? Because the Limits to Growth team pretty clearly underestimated both dematerialization and the endless search for new reserves. Capitalism and tech progress combine to drive both of these trends—the use of fewer resources and the hunt for more of them—and neither of these two drivers is about to become less powerful. So we’ll continue to innovate our way to greater dematerialization while we keep finding more reserves.

How would the system respond? Could the New Peace survive without its policeman? Good counterfactual analysis minimizes the number of both assumptions and alterations of reality. It is also obviously wise to choose relatively simple cases, ones that do not involve many potentially confounding variables. 127 The ramifications of an actual supervolcanic blast would not be contained in the United States; the massive amount of material ejected into the atmosphere would blot out the sun and cause global temperatures to drop for years. To keep this thought experiment manageable, let us imagine a natural disaster that only affects the United States, one resulting in the effective disappearance of U.S. military and political engagement with the rest of the world. The effect of an aloof United States on some regions need not be imagined because it already exists. In South America, the U.S. Southern Command has a minuscule operating budget and no troops to speak of, despite its theoretical “responsibility” for the entire continent. The United States maintains no significant physical presence in Africa or large swaths of Asia. A Yellowstone supereruption would presumably not change security calculations in these areas much at all. Europe would be similarly unaffected, sat least in the short term. The United States currently maintains 95,000 troops from all services in its European Command, none of whom are tasked with maintaining the internal stability of its allies. During the Cold War, U.S. troops did not involve themselves in the domestic conflicts of their host states, unlike their Soviet counterparts. Their job was always to protect Europe from without, not within. The continent is the world’s most stable, its countries the most cooperative, and its people the least martial. It would probably take more than the removal of U.S. troops for ash-cleaning duties to bring back security dilemmas, arms races, and conflict. Borders have hardened, as have norms of conflict resolution. No one can know for sure, of course, but Europe does not seem to be a good candidate for chaos in the absence of the United States. Without the presence of U.S. forces, much of the Middle East would be unstable and chaotic. With the presence of U.S. forces, much of the Middle East is unstable and chaotic. A supervolcano erupting in Wyoming would not have much impact on the security of the world’s most dangerous region. Israel would be just as safe as it was before, since its marked military superiority over all potential rivals is the ultimate guarantor of its security, not U.S. troops or ships. Without the prospect of help from Uncle Sam, the failing governments of Iraq and Libya, as well as the rebels in Syria and our allies in Saudi Arabia, Yemen, Jordan, and elsewhere, would learn to become more self-sufficient. Perhaps they would even make long-term deals with their rivals. It might be good to throw them out of the U.S. nest and encourage them to fly on their own or crash. Fears of a resurgent Iran would be articulated by the usual suspects, no doubt, but both history and the realities of power suggest Tehran would find it hard to dominate its neighbors, even if it had the will to do so. The regions that would be of most concern in such a scenario would be the peripheries of those once and potentially future great powers, Russia and China. To believers in the “deterrence model,” first described by Robert Jervis four decades ago, weakness is provocative, and the post-U.S. world would seem everywhere weak. 128 Moscow and Beijing would attempt to expand their influence, and ultimately perhaps their borders, once they were assured that they would face no pushback from Washington. Perhaps gradual interference in their near-abroads, such as we have already seen in eastern Ukraine, northern Georgia, and the South China Sea, would occur with increasing frequency in the vacuum left by a U.S. withdrawal. While such expansion cannot be ruled out, especially in the long run, large border adjustments would probably not occur in the absence of U.S. power, for least two reasons. First, the removal of American troops would not alter the calculations regarding the costs and benefits of conquest in the twenty-first century. Although absorbing neighbors sometimes paid substantial dividends in the pre–information age, today territory is unrelated to wealth. 129 The people of larger states are not automatically better off than those of small ones. India is not richer than Singapore; Russia would not benefit from invading Ukraine; China would hardly be materially better off if it ruled Taiwan. The other members of the international system might not be able to stop such adventurism militarily, but they can certainly punish it economically. The costs related to invasion and the inevitable problems that arise during occupation would outweigh any possible benefits that may accrue. Conquest in a trading system is profoundly irrational, and the incentives for peace are strong. Rational calculations are not the only motivations for cross-border violence. As Norman Angell argued a century ago, people have to believe that war is not worth the cost before they will forswear it. 130 The quest for glory and prestige has sent many an army into motion over the centuries; Alfred Thayer Mahan responded to Angell’s rationalism a century ago by pointing out that “nations are under no illusion as to the unprofitableness of war itself” but honor often compels them to fight anyway. 131 By 2017, however, those calculations have changed. It is not at all clear that glory still automatically accompanies conquest. The second reason to believe that Russia and China might not dominate their near-abroads in an essentially U.S.-free world is that the behavioral norms of the New Peace discourage aggression. Imperialism invites opprobrium, not admiration. This does not mean that such assaults could not happen—Genghis Khan was unconcerned about opprobrium, for instance, and Vladimir Putin might be too—but surely it is significant that conquest has been all but absent since the Second World War. The unipole is not the only thing restraining potential combatants; both their material and reputational interests do so as well. If and when a catastrophic supervolcanic eruption weakens the United States, other countries would still have substantial interest in maintaining the overlapping network of international economic and political institutions that serve the interests of all members. All would want to see free trade and investment continue unmolested, whether or not the global policeman could punish violators. Most would continue to place some value on international law, human rights, and the UN system. Why any state would want to move backward to a mercantilist time of pure self-help and violence would be difficult to imagine. It is 2017, not 1717. Volcanologists assure us that someday Yellowstone will awaken with terrifying fury. The human and material cost will be immense, but the ramifications for international security may not be as dramatic. While it might take that kind of event to settle the questions concerning hegemonic-stability theory once and for all, we can still use our imaginations to anticipate the kind of reaction that the system would have if the global 911 is taken off the hook. Even more decisively than a Trump superpresidency, a supervolcano eruption would test the New Peace and settle forever debates over the importance of unipolarity. Until then, one can only imagine what the system would be like without the United States. And the smart money would be with those who say that it would probably look pretty much the same, with very small amounts of conflict and warfare, even if few people seem to notice. In the end, what can be definitely said about the relationship between U.S. power and international stability? Probably not much that will satisfy partisans. The pacifying virtue of U.S. hegemony will remain largely an article of faith in some circles in the policy world. Like most beliefs, it will resist alteration by logic and evidence. Beliefs rarely change, so debates rarely end. For those not yet fully converted, however, perhaps it will be significant that corroborating evidence for the relationship is extremely hard to identify. If indeed hegemonic stability exists, it does so without leaving much of a trace. Neither Washington’s spending, nor its interventions, nor its overall grand strategy seem to matter much to the levels of armed conflict around the world (apart from those wars that Uncle Sam starts). The empirical record does not contain much support for the notion that unipolarity and the New Peace are related. At the same time, three common psychological phenomena suggest that hegemonic stability is particularly susceptible to misperception. U.S. leaders probably exaggerate the degree to which their power matters. Researchers will need to look elsewhere to explain why the world has entered the most peaceful period in its history.

Finally, the latter set of supposedly existential normative or ideological threats consists of many elements, including Beijing’s possible overturning of the so-called global liberal international order, Chinese influence operations aimed at U.S. society, the export of China’s political values and state-directed economic approach, and its sale of surveillance technologies and other items that facilitate the rise or strengthening of authoritarian states. These threats all seem hair-raising at first glance. But while significant, they are greatly exaggerated and do not rise to the level of constituting an existential threat.

Beijing has little interest in exporting its governance system, and where it does, it is almost entirely directed at developing countries, not industrial democracies such as the United States. In addition, there is no evidence to indicate that the Chinese are actually engaged in compelling or actively persuading countries to follow their experience. Rather, they want developing nations to study from and copy China’s approach because doing so would help to legitimize the Chinese system both internationally and more importantly to Beijing’s domestic audience.

As the preceding sections have noted, the United States is in a position of relative advantage regarding its level and trajectory of total and old-age dependency as compared to Europe and China. Nevertheless, the OECD forecasts that, by 2075, the United States’ old-age dependency ratio will be over 0.49, meaning there will be nearly one elderly dependent for every two working-age Americans (OECD, 2017). While this is considerably lower than the forecasted average for OECD member states of 0.59, it is nevertheless cause for concern. First, this forecast assumes constant migration flows. Yet, as the previous section noted, U.S. migration has been declining precipitously for the past generation.

In this paper we seek to measure the extent to which the current social security system supports the social safety net, that is, the extent to which it redistributes resources to the poor. To do so, we build a model that incorporates all the information needed to categorize individuals by lifetime resources and to calculate their taxes paid and benefits received from the system. We have several findings.

First, we find that using comprehensive concepts of income implies that the Social Security system exhibits less overall redistribution than when it is evaluated using more narrow definitions of income. For example, when evaluated using potential labor earnings at the household level (rather than actual individual earnings), the Social Security retirement program exhibits virtually no overall impact on inequality (as measured by the change in the Gini coefficient). Second, we look at each quintile of the lifetime income distribution. We find that the lack of impact on overall inequality is largely driven by the lack of impact across the middle and upper part of the income distribution, whereas most of those in the bottom income quintile may, in fact, still get net benefits from the program. Third, even when redistribution does occur, we find that it is not efficiently targeted, with many high income households receiving net transfers, while many low income households pay net taxes. Finally, we show that the impact of Social Security on inequality differs across cohorts, but the direction and extent of those changes depends on the income concept employed.

To what extent do America's seniors rely on Social Security benefits for their retirement income? For many years, policy analysts and the SSA itself relied on the Current Population Survey (CPS) alone to answer that question. According to these data, Social Security represented by far the largest component of seniors' incomes, and for nearly a quarter of that population, more than 90% of their income. Doubts about the accuracy and completeness of this survey data, however, have mounted over the years. Under my direction, researchers at the SSA completed a lengthy, painstaking project of supplementing the CPS data with SSA and IRS administrative records. These new data, which represent the state of affairs in 2015, show a substantially lower share for Social Security in seniors' income and a much higher share for pensions and retirement accounts. Using the CPS data only, Social Security accounted for nearly 35% of total senior income, while pensions and retirement accounts represented only 22%. With the new data, the reality is almost flipped: Social Security makes up only 30% of total senior income, while pensions and retirement accounts represent 36%. (The other main sources of income include earnings and asset income.) Similarly, using the CPS data alone, fewer than half of senior families had pension- and retirement-account income. But according to the new data, nearly 70% do — in range of the 85% to 90% of those with Social Security income. Finally, whereas according to the CPS data, more than 50% of the senior population relied on Social Security for at least half of their income (and 25% relied on it for 90% or more), the new, more accurate, and more inclusive data reduce those rates to 40% and less than 15% of the senior population, respectively.

Experts disagree on how well prepared Americans are for retirement. Data on income and savings aren’t perfect, and economists differ as to how much they think a household actually needs to fund a comfortable retirement. Some studies find a large retirement-savings gap, while others — including some well-respected work — find that most Americans are doing well in saving for retirement. I’m on the more optimistic side of that debate, but any honest researcher would admit that a legitimate debate on retirement income security exists. Which is why the Washington Post’s lengthy exposition of “The New Reality of Old Age in America” is so disheartening. It has everything that poor journalism exhibits: excessive reliance on anecdotes, the use of misleading and sometimes outright incorrect data, and the one-sided citation of experts. Here is a paragraph where the authors summarize their major conclusions: While some work by choice rather than need, millions of others are entering their golden years with alarmingly fragile finances. Fundamental changes in the U.S. retirement system have shifted responsibility for saving from the employer to the worker, exacerbating the nation’s rich-poor divide. Two recent recessions devastated personal savings. And at a time when 10,000 baby boomers are turning 65 every day, Social Security benefits have lost about a third of their purchasing power since 2000. Nearly all of this is either misleading or simply wrong. The Post reporters focus on a key statistic — that the percentage of older Americans who continue to work is rising — and spin it into a picture of seniors on the edge of financial disaster. The Post illustrates this trend with portraits of low-income retirees seeking to make ends meet by continuing to work, often in difficult jobs. Americans are in fact working longer, which is both to be expected as lifespans increase and to be celebrated as seniors overcome age discrimination, health factors, and the deterioration of their technical skills to extend their work lives and build retirement savings. Moreover, as I pointed out in a 2015 Wall Street Journal op-ed, retirees aren’t all working at Walmart-greeter wages. Older Americans’ labor-force participation rose even as that of younger Americans fell, but older workers maintained their wage levels. So the Post’s whole narrative that working longer is evidence of a retirement crisis is suspect. Worse, most of the Post’s supporting evidence also falls short. Just to start, one might expect that if retirees had “alarmingly fragile finances,” as the Post claims, they would also have a high poverty rate. And yet we see precisely the opposite: Recent research from two Census Bureau economists, C. Adam Bee and Joshua Mitchell, finds that only 6.9 percent of Americans aged 65 and older have incomes below the poverty line. The poverty rate among working-age Americans is roughly double that level; among children, it’s at least triple. If poverty drops as Americans retire, how can that be a sign that our retirement system — which combines Social Security with employer-sponsored retirement plans and personal saving — isn’t working?

So is it possible the retirement crisis is oversold? “It’s not merely possible, it’s probable,” said Andrew Biggs, a scholar with the American Enterprise Institute in Washington and former deputy commissioner for policy at the Social Security Administration. For one thing, he notes that while many contend low-earning Americans aren’t saving enough for retirement, poverty is lower during retirement than during people’s working years. A 2016 Census Bureau report shows that in 2015 just 8.8 percent of people 65 and older were impoverished, compared to 19.7 percent of children under 18 and 12.4 percent of 18- to 65-year-olds. If there were a crisis, Biggs says, retired people should be complaining. Yet a 2016 Gallup poll found 74 percent of U.S. retirees say they are living comfortably. And a 2017 Vanguard report found just 16 percent of retirees were dissatisfied with their financial situation, compared with 21 percent of pre-retirees. Perhaps most surprisingly, Biggs points to recent research suggesting retiree incomes generally match or even exceed their pre-retirement incomes. A 2017 study by Internal Revenue Service and Investment Company Institute researchers analyzed tax returns and found most people experience no income dropoff after claiming Social Security. In fact, the median household’s income rises after retirement. “It’s hard to paint a picture where this leads to a true retirement crisis,” Biggs said. Retirement policy can get tangled up in ideology, partisan politics and Beltway power struggles. Presumably, those concerns would not influence a Canadian such as Frederick Vettese, chief actuary at Toronto-based human resource advisor Morneau Shepell and author of The Essential Retirement Guide: A Contrarian’s Perspective. Vettese also doubts the retirement crisis. “The retirement savings crisis has definitely been oversold,” he said. “A good indication of this is that pre-retirees have a significantly higher level of concern about whether they are financially prepared for retirement than is the case for retirees.” Buttressing Vettese’s point, the 2017 Vanguard study found that 10 percent of U.S. pre-retirees considered their financial situation to be in crisis, while just 4 percent of retired people felt likewise.

But there’s more to it than that. The “retirement crisis” narrative is helped along by the fact that nearly no one has an incentive to deny it. Financial firms unsurprisingly want you to save more for retirement, so they’re not going to tell you that you’re over-saving. Political progressives distrust private markets and want Social Security to play a stronger role, so they downplay any progress.

The news media like frightening stories. No one clicks on an article with the headline, “U.S. retirement savings doing well.” But “Americans Entering Old Age the Least Prepared in Decades”? That Wall Street Journal article won a journalism award while getting key facts wrong about Americans’ savings and retirement incomes.

The holidays are a time when we express gratitude for making it through another year, and for the family, friends and co-workers who helped us do it.

But with each passing year, we also come closer to retirement. And for that we may want to show thanks for something that is seldom mentioned: a retirement system that has grown significantly stronger over time, and which today helps the vast majority of Americans live well in old age.

Soaring inflation and devalued currencies have created a catastrophic debt crisis for much of the world, including in countries like Lebanon, Iraq, Egypt, Sri Lanka and Pakistan. Malaysian economist Jomo Kwame Sundaram says the instability is largely driven by interest rate hikes by the U.S. Federal Reserve, which have the effect of increasing borrowing costs for poorer countries and devaluing their currencies compared to the U.S. dollar. The intensifying U.S. economic war on China is also hurting many countries of the Global South that are linked to Chinese industry, he says.

AMY GOODMAN: This is Democracy Now!, democracynow.org. I’m Amy Goodman, with Nermeen Shaikh.

The US threat to bring Ukraine into NATO, which caused the Ukraine military conflict, signifies the United States has been prepared to cross a new threshold in its aggressive international military policy. Previously the US carried out military actions against developing countries with far weaker armed forces than itself - Serbia (1999), Afghanistan (2001), Iraq (2003), Libya (2011). But the US threat to extend NATO into Ukraine was a policy which it knew in advance affected the most fundamental national interests of a country with strong military forces including nuclear weapons - Russia - therefore explicitly crossing Russia's "red lines."

As I lived in Moscow from 1992-2000, I knew every significant Russian political viewpoint, whatever their other differences, agreed that Ukraine's membership of NATO, placing missiles within a few minutes flying time to Moscow, would be a deadly military threat.

Any period of economic uncertainty can make a major financial decision – like – more stressful. While the housing market on a national scale has seen prices decline since the all-time highs of mid-2022 amid high interest rates, experts are noting that a sudden and abrupt housing market crash is unlikely, based on current market conditions. Housing demand and supply, and unemployment all play roles in how the real estate market fares. Currently they indicate a period of decline in some markets and growth in others, and a decline in transactions compared to recent years overall – but certainly not as significant a decline as seen in the housing market crash of 2008-2009. A recession would put stress on the housing market, and experts predict one in the near future. To avoid rippling impacts in housing, there may be a tightening of mortgage lending practices, but homeowners with existing mortgages are still considered stable, and many of them remain uninterested in leaving their homes in the near future. In economics, a bubble is defined as a period of rapid market value growth of an asset – in this case, homes. Considering the fast pace of the housing market that has lasted roughly the length of the COVID-19 pandemic, rapid market value growth accurately describes the up until about midway through 2022. Home price growth was in the double digits year over year every month from August 2020 thru mid-July 2022, based on home sale price data from Redfin. Signs of a growing housing bubble slowed throughout the rest of 2022 and into the first weeks of 2023, however, as home prices continued to decline month over month during that time. Now, median home prices on the national scale are seeing minor year-over-year declines: The median home price in the U.S. between May 15 and June 11 was $381,000, 2.6% month-over-month increase and a 1% decline compared with the same time period in 2022, according to Redfin. With that in mind, the U.S. housing market is not currently experiencing a rapid increase in home prices indicating a growing housing bubble, but the bubble that has formed in recent years may be seeing some mild correction. If recession comes in the latter half of 2023 as many experts predict, a further drop in demand leading to additional decline in home prices could see prices drop a bit more than they have in the first half of the year. “Could a little air be let out of that bubble? Perhaps,” says Mike Reynolds, vice president of investment strategy at Glenmede, a Philadelphia-based wealth management firm. Reynolds notes that current conditions and shortage of housing availability in general indicates that it’s unlikely, at least at this time, that recession would result in a bubble burst or sudden home price plummet. Home Prices Can Decline Without a Housing Crash While any drop in home prices may feel like the last thing a home seller would want, a slight market correction could help better align prices with what homebuyers – including sellers looking for their next home – can afford. A major challenge to that affordability threshold right now is the increase in mortgage interest rates that began in mid-2022. While are technically independent of the federal funds target rate set by the Federal Reserve, they often increase or decrease as a result of the Fed’s actions. The federal funds target rate has been raised repeatedly in the last year in a marked effort to curb inflation. The Fed most recently opted not to raise the target rate in mid-June, though at least two more rate hikes are expected before the end of the year. The average 30-year, fixed-rate mortgage interest rate reached more than 7% in October and November 2022, but dropped close to 6% in January. The average interest rate has shown some volatility since March, climbing toward 7% again, then dropping back down. The average rate for a 30-year, fixed-rate mortgage as of June 15 is 6.69%, according to Freddie Mac. With many homeowners who purchased or refinanced between 2020 and mid-2022 locked into a mortgage interest rate somewhere around 3%, moving becomes downright unattractive. “Low inventory is going to be a problem for a while, because if homeowners don’t have to sell, the data suggests that they won’t,” says Danielle Hale, chief economist for Realtor.com. The decrease in the number of home sales since interest rates initially rose in 2022 is stark. From May 15 through June 11, there were more than 17% fewer homes sold compared with the same time last year, according to Redfin data. But the ability for homeowners now to wait out economic uncertainty – and climbing interest rates – may be what keeps any from becoming more concerning. As much as 82% of homeowners feel “locked in” to their current mortgage, according to a Realtor.com of 1,200 recent or potential home sellers published in April. Whether a homeowner feels locked into a current mortgage rate appears to be mostly generational. “The baby boomers were less likely to say they feel locked in,” Hale says. “That probably coincides with the fact that they’ve lived in their homes longer.” The easing of mortgage rates in late March and early April encouraged some buyers to come back to the market, and thus far they’ve continued to return heading into the traditional homebuyer season. Orphe Divounguy, senior economist for Zillow, reports that many buyers seem to have adjusted to higher mortgage rates, and the spring homebuying season saw a spike in activity like usual. But home sellers have stayed away. “That means that buyers are absorbing all of the current inventory and inventory remains at an all-time low,” Divounguy says. As a result, the number of homes going under contract is still down compared with the same time in 2022, but it’s getting closer to even. Zillow reports that newly pending listings were down 21% in May compared with May 2022. Additional economic uncertainty could lead more buyers to once again back away from house hunting and sellers to stay put. Year-over-year home prices may continue to decline in that case, but likely on a fairly small scale and without the threat of a crash. Read: What’s Different From the 2008 Housing Market Crash? Homeownership can feel scary during any point of economic uncertainty – especially if you have a vivid memory of the and the housing market crash of 2008 and 2009. “The 2008 housing crash that they think about was due to the overextension of loans to people that were not solid borrowers,” says Kimberly Jay, licensed associate real estate broker for Compass in Manhattan. Predatory lending practices in the first years of the 21st century meant many homeowners faced foreclosure when adjustable interest rates rose, and unemployment further increased the number of properties in foreclosure. Housing demand was artificially propped up by issuing mortgages to people who weren’t in good financial places to buy and maintain homes, and the economic downturn also meant buyer demand plummeted. Home values declined significantly as a result. The current situation is very different compared with the Great Recession, Reynolds explains. “We don’t see a lot in the way of excess this time around,” he says. Another major difference between today’s market and the housing crash is the issue of supply – excessive building leading up to 2008 meant that when demand dropped, there were entire housing developments that sat vacant. Cut to 2023, and housing is still catching up on the low rate of building compared to household formation since the Great Recession. With today’s homeowners, laws and regulations are in place to prevent predatory lending since the Great Recession. Even as high home prices and rising interest rates have increased the total , making homeownership unaffordable for otherwise would-be homebuyers, there are still more qualified buyers searching for homes than there are properties for sale. With all these factors combined, Reynolds says a crash, at this point, is unlikely even with a recession expected in the future. However, he also notes that a recession can also reveal instabilities or assessment errors that weren’t apparent prior to a drop in GDP. As a result, economists and strategists have to be ready for a couple of surprises once recession does occur. “That’s kind of an Unknown unknown that sits out there that could move the needle a little,” Reynolds says. What the Silicon Valley Bank Failure Means for Mortgages and the Housing Market The news cycle following the and First Signature Bank in March, and First Republic Bank in May, has had many people wondering if there will be a larger financial crisis for the American people. Runs on the banks led to their insolvency – should anyone shopping for a home be worried about their savings in a bank? In many cases, no. “For the most part, this banking crisis has been really limited to banks that have had sort of a narrow concentration of who their banking customer is,” says Melissa Cohn, regional vice president of William Raveis Mortgage in New York. Homebuyers currently applying for a mortgage may find that lenders are getting even more thorough in their due diligence than in recent years, “double-dotting their i’s, double-crossing their t’s to make sure that you’re secure in your job,” Cohn says. Other banks may be less interested in lending money altogether right now. “I have seen some banks sort of raise their rates to step to the sidelines for the time being,” Cohn says. If you have a mortgage on your current home and you’re planning to stay put, even if the bank that possesses your mortgage fails, you don’t have to worry as long as you can keep making payments. “There’s zero risk. Once you close on a mortgage no one can come and say, ‘Sorry, you have to give it back,’” Cohn says. “They can’t take your mortgage away from you.” For homebuyers in the act of shopping around for a mortgage, the best advice is to do your research and ask lots of questions. Matt Vernon, head of retail lending for Bank of America, says that the bulk of homebuyers inquiring with the bank are knowledgeable about the process, the current state of mortgage rates and their own financial situation. “Certainly folks are aware of the environment that’s around, but when they come to us … they are very confident in their ability to purchase the home,” Vernon says. Building Permits Are Down – but Housing Demand Isn’t As of April, the U.S. Census Bureau’s Building Permits Survey reports there were 75,100 single-family building permits filed in the U.S. (unadjusted), slightly above the forecast of 72,190 permits predicted for that month in the . Still, it’s well above anything compared to the Great Recession: After the housing bubble burst in 2008, building permits for single-family detached homes cratered to a low of 22,100 in January 2009. In a typical year, the number of building permits for bottoms out in December and January then steadily climbs until peaking in the spring and summer months. The U.S. News Housing Market Index forecasted March as the peak for new building permits this year, declining through the summer and start of fall with a little over 48,000 in September. Compare that to September 2022’s 70,800 permits. With far fewer permits already, expect new home construction to slow. Builder sentiment, while low compared to 2021, has risen slightly in recent months to 55 out of 100 as of June 2023, according to the National Association of Homebuilders and Wells Fargo Housing Market Index. In comparison, builder confidence reached a whopping 84 in December 2021, and was as low as 31 in December 2022. Builder sentiment is based on the number of new single-family homes, predicted single-family homes in the next six months and overall traffic of buyers. “New construction is down from its pandemic era peak, but builders are still working and trying to fill in the gaps that existed,” Hale says. READ: How Does a Recession Typically Impact the Housing Market? At least two consecutive quarters of negative GDP growth make a , and it’s typically accompanied by an increase in unemployment and decrease in consumption by the general public. The financial strain individuals face during a recession leads to a slowdown in the housing market – homebuyers may pause their search if they’re worried about layoffs, and there may be an increase in foreclosure activity while higher unemployment increases the number of people who can’t pay their mortgages. However, once activity on the housing market slows enough, mortgage interest rates drop to a point where buyers reenter the market, interested in getting a good deal. Unlike in the Great Recession, an increase in housing market activity helps bring the economy out of recession. The real GDP increased in the last two quarters – by 2.6% in the fourth quarter of 2022 and 1.3% in the first quarter of 2023, according to the Bureau of Economic Analysis. Unemployment has largely remained low, at 3.7% in May, though it did rise 0.3 percentage points from April, according to the Bureau of Labor Statistics. While these indicators show no recession right now, most experts agree that a recession is likely in 2023, particularly as we see GDP growth slow from quarter to quarter and unemployment tick up slightly. Divounguy expects the economy to cool between now and the end of the year. “If that does happen, mortgage rates will tick down and we should see a pretty strong housing rebound in 2024 – in spring 2024,” he says. The severity of a recession could impact how much the housing market reacts. Reynolds says a more run-of-the-mill recession, neither mild nor severe, may lead to a larger correction of home prices, helping housing become affordable for more people faster. A milder recession, on the other hand, “we may not see prices react all that much to the downside,” Reynolds says. What Conditions Could Lead to a Housing Market Crash or Housing Bubble Burst? While current conditions don’t point to a housing market crash, there’s no crystal ball to guarantee how the economy will fare in the next few months or years. A few factors that could make the housing market more unstable include: Unemployment. A slight increase in unemployment would be OK, but a bottom fallout could be an indication of danger for the housing market. If too many people are without work, then distressed home sales climb and foreclosures become more likely. “There are predictions of an upcoming recession and possible large-scale layoffs. That surely would raise the number of households who fall behind on home loans and send foreclosure numbers upward,” wrote Rob Barber, CEO of market intelligence at real estate data company ATTOM, based in Irvine, California, in an email. Homebuilding. With the slowdown in buyer activity, homebuilders are pulling back and there are . That can prolong the housing shortage and draw out the demand-supply imbalance. Buyer demand. Housing markets have cooled slightly, but demand hasn’t disappeared, and in many places remains strong largely due to the shortage of homes on the market. If buyer demand completely disappears, it would be a sign of a problem. Homeowner equity. If homeowner equity sees a massive drop, either home values are dropping fast or there’s an influx of buyers who are putting little money down. High equity now serves as a cushion for the housing market in case of economic downturn. “Having equity in a home provides a lot of motivation for owners to get caught up on their loans and preserve what they've built up,” Barber says. “Even when they can't, most can still sell, pay off their outstanding debt and come out with at least a small profit if they bought more than a year ago.” Foreclosures. “(I)t's hard to pinpoint a benchmark for (foreclosure) increases that would cause alarm. But if the late 2000s are any guide, quarterly foreclosure caseloads that spike by more than 10% per quarter would be a serious warning bell of danger for the U.S. housing market,” Barber says. “That's what happened in early 2006 before the Great Recession hit and the market started falling in 2007. This is definitely a metric worth watching very closely over the next year.”