This is the second-biggest home price correction of the post-WWII era—it’s also a fairly mild correction

On one hand, that 2.5% drop in U.S. home prices marks the second-biggest home price correction of the post–World War II era. On the other hand, through November, it’s just a mild correction compared to the 26% peak-to-trough drop notched between 2007 and 2012.

What’s driving the ongoing housing correction? It boils down to what Fortune calls “pressurized” affordability: Last year’s three-percentage-point jump in mortgage rates combined with U.S. home prices running up 41% between March 2020 and June 2022 has simply pushed homeownership out of reach for too many buyers. Cue falling home prices.

There’s something else at play too: This time around, buyers and sellers alike know prices can fall.

“I think that the religion people had from 1946 to 2008, that housing prices always go up, is dead. My parents believed that it was literally inconceivable for [home] prices to go down,” Redfin CEO Glenn Kelman told Fortune last year. However, that so-called home price “religion” got broken, Kelman says, by the 2008 crash. “So folks respond [now] to that [correction] with almost PTSD, and they pull back much more quickly.”

Let’s take a closer look at the latest Case-Shiller data.

For 124 consecutive months, from the bottom of the previous correction in February 2012 to the peak of the Pandemic Housing Boom in June 2022, the seasonally adjusted Case-Shiller National Home Price Index reported positive month-over-month home price growth. That’s been replaced by this new streak: five consecutive months of U.S. home price drops.

That said, this ongoing housing correction is hardly one-size-fits-all. In particular, it’s driven by declines in overheated Western housing markets like San Francisco (down 11.9% since its 2022 peak), Seattle (down 13.5%), Phoenix (down 7.7%), and Las Vegas (7%).

Meanwhile, markets that didn’t get as detached from fundamentals during the Pandemic Housing Boom, including New York (down 2% from its 2022 peak) and Chicago (down 0.8%), aren’t seeing as sharp a home price correction.

It’s true that the U.S. housing market slipped into a home price correction in the second half of 2022. It’s also true that the 2.5% decline is minor compared to the massive Pandemic Housing Boom gains.

Between March 2020 and June 2022, U.S. home prices soared 41.4%. Through November, those total Pandemic Housing Boom gains have only slipped to 37.9%. That’s a mild correction—not a full-blown housing crash.

The hottest debate among housing economists and analysts is whether this home price correction will fizzle out or deepen in 2023.

Firms like CoreLogic and Zillow think the tight inventory environment will contain the home price correction going forward. Meanwhile, firms like Moody’s Analytics, Capital Economics, and Goldman Sachs believe home prices have further to fall even if home sales are nearing their respective bottom. (You can find the home price outlook from 29 of the nation’s leading real estate researchers here.)

“I expect house prices to fall almost 10% peak-to-trough. This is necessary to reestablish housing affordability, given expected weak household income growth (even without a recession) and mortgage rates that average 6.5% this year before moderating back to 5.5% by mid-decade. If mortgage rates turn out to be lower and/or household income growth stronger, then the house price declines won’t be as severe. I have revised the length of time it will take for house prices to reach their trough, which will likely be two to three years from now. Current homeowners are holding off selling, even if experiencing life events that would typically cause them to sell, hoping that mortgage rates come down and market conditions improve. But eventually they will need to sell, inventories will increase, and prices will weaken. Having said this, the current resilience in house prices suggests the adjustment in house prices will not be a serious threat to the financial system or macroeconomic problem,” the Moody’s Analytics chief economist tells Fortune.

Want to get the latest housing data? Follow me on Twitter at @NewsLambert.

Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.