A Torrid Housing Market Brought to Heel
The US housing market is emerging from a period of price inflation not seen since the run-up to the global financial crisis. In 2021 alone, US housing prices jumped nearly 20% on a year-over-year basis, driven by low mortgage rates, surging demand—particularly by millennials—and work-from-home flexibility brought about by the COVID-19 pandemic.
But perhaps the single biggest driver of housing inflation has been a lack of supply. In recent years, the US has seen some of the lowest home inventory levels on record. This has led to frenzied bidding wars, with properties in hot markets routinely selling above asking prices.
Home Affordability Has Taken a Hit
With the Federal Reserve on a quest to snuff out inflation, however, the era of ultralow mortgage rates is over, with the national average for a 30-year fixed-rate mortgage north of 6%. That’s more than double the level registered in January 2021, and the Federal Reserve is telegraphing more rate hikes to come.