by Ed Pinto
The 10-year old seller’s market continues, evidenced by:
- Strong volume, in spite of a cumulative 33% increase in constant quality home price appreciation (HPA) since January 2020,
- Historically tight supply,
- The work from home revolution, and
- Arbitrage opportunities due to wide intra-metro, regional, and national pricing differences.
Purchase volume for week 18 is down 6% but up 18% over 2021 and 2019, respectively. However, HPA remains strong. With no supply relief on the horizon, we expect y-o-y HPA to remain at 15-20% until rates are at 6% or more. At that point, demand should drop, and supply should grow, with the greatest HPA slowdown felt at the high end of expensive markets and low end of some FHA markets.
The Fed’s accommodative monetary policies of near-zero interest rates and quantitative easing have resulted in a wealth effect from the $18 trillion in stock market and home price appreciation gains. This wealth effect is driving strong demand pull inflation. These policies are also making homes increasingly unaffordable for potential low-income homebuyers. At the same time, general inflation is driving up the cost of food, energy, and other necessities.