Over the past two years, that pandemic housing boom has seen U.S. home prices soar 34.4%. That tops the biggest two-year jump in home prices (21.2%) posted in the run-up to the 2008 housing bubble. How could that happen? A perfect storm. In an effort to save the economy, policymakers juiced it during the pandemic with unprecedented fiscal and monetary support, including pushing mortgage rates to all-time lows. Those low rates were too good a deal for well-paid professionals who saw their jobs transition to remote to pass up, as they drove up home values in markets like Boise and Austin. They certainly had competition: The pandemic coincided with the five-year window (between 2019 and 2023) when millennials born during the generation’s five largest birth years (between 1989 and 1993) hit the peak first-time homebuying age of 30. To top it off, a stock market at all-time highs during much of the pandemic had investors flush with cash and ready to park it into real estate.

But we could soon see that boom finally come to a close.

As data rolls in for April and May, it’s clear that the pandemic housing boom is cooling—fast. We’re now transitioning into a new phase, or as Fortune calls it: the Great Deceleration. Heading forward, the breakneck rate of home price growth is expected to enter into a period of deceleration.

“The housing market is clearly softening,” Devyn Bachman, vice president of research at John Burns Real Estate Consulting, tells Fortune. “In some cases buyers have stopped searching for a home altogether.”

Why is the U.S. housing market finally shifting? There are three main reasons.

First, the Federal Reserve has moved into inflation-fighting mode. The central bank has made it clear: Slowing inflation requires slowing down the red-hot housing market. That’s why the Fed has put upward pressure on mortgage rates, which have climbed from 3.11% to 5.25% over the past five months. Rising mortgage rates rise cause “demand destruction” as would-be homebuyers get priced out.

Second, the overheated 2022 spring market has pushed us over the edge into what housing economists call an overvalued housing market. Last month, Fortune asked Moody’s Analytics for its proprietary analysis of U.S. housing markets. The firm’s data shows that 96% of regional housing markets are “overvalued” and have home prices that are above what local income levels can support. Simple economics dictates that home price growth (up 19.8% over the past year) can’t outpace wage growth (up 4.8% over the past year) by wide margins forever. The housing boom, with help from soaring mortgage rates, may have finally gone too far.

Third, the U.S. economy is losing steam. The Fed isn’t just attacking exuberance in the housing market: It’s also attempting to slow down the red-hot labor market. Fed chair Jerome Powell has acknowledged that pulling inflation back down will likely require an uptick in unemployment. If the Great Resignation has its own Great Deceleration, it’ll undoubtedly trickle over into the housing market. There’s something else. If a recession does come, employers could use their increased economic leverage to force staffers back into the office. And if that happens, it could dry up the WFH buying boom.

Now let’s take a closer look at the data.

The pandemic housing boom absolutely crushed housing inventory. Indeed, heading into this year's spring market, inventory levels were 48% below pre-pandemic levels. The lack of options, of course, gave homebuyers little choice but to bid up home prices at a record clip.

The good news for homebuyers? Inventory levels are finally inching up again. In March, inventory on Zillow.com stood at 715,800 homes. That climbed up to 740,000 in April. Industry insiders tell Fortune that rising inventory—something they expect to go higher this month—indicates softening. However, as long as inventory remains well below pre-pandemic levels, there will be upward pressure on prices.

"April was an inflection point in the housing market where there were just early hints of slightly cooler demand. The May housing market captured an even greater shift," Ali Wolf, chief economist at Zonda, a housing market research firm, tells Fortune. "The shift needs to be put in context. Housing demand was manic for the past two years, and the shift that we're seeing so far isn't catastrophic. While demand has softened, there are still more buyers than sellers given the acute lack of inventory."

The uptick in inventory alone doesn't prove a huge shift in the housing market. Historically, the housing market usually begins to see inventory levels rise around this time of year as buyers get distracted by the onset of the vacation season. For further proof of cooling, we also need to look at sales.

On Tuesday, the U.S. Census Bureau reported the annual rate of new home sales fell 17% between March and April. It was also the lowest reading for new home sales since the depths of the COVID-19 recession in April 2020.

It isn't just new home sales that are falling. This week marks the ninth week over the past three months that new mortgage applications have fallen, according to the Mortgage Bankers Association. Meanwhile, Redfin reports that the share of homes with price reductions continues to rise while the share of homes getting multiple offers is decreasing.

"The dramatic increase in the average monthly mortgage payment has priced some buyers out of the market and caused others to get cold feet. Discretionary buyers do not want to buy when they feel like they are purchasing at the peak of a cycle," Bachman says. "Price reductions are happening and will likely continue as demand and supply metrics begin to recalibrate."

If you'd like to stay up on the housing market, follow me on Twitter at @NewsLambert.